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 Forward-Looking Statements

 

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations.  Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Registrant to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.  The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties.  The Registrant’s plans and objectives are based, in part, on assumptions involving it continuing as a going concern and executing on its stated business plan and objectives.  Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Registrant.  Although the Registrant believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate.  In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Registrant or any other person that the objectives and plans of the Registrant will be achieved.

As used in this Quarterly Report, the terms "we", "us", "our", "Blue Water", “Registrant”, and “Issuer” mean Blue Water Global Group, Inc. unless the context clearly requires otherwise.

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PART I – FINANICAL INFORMATION

Item 1.  Financial Statements

BLUE WATER GLOBAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

ASSETS

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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BLUE WATER GLOBAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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BLUE WATER GLOBAL GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ (DEFICIT)

THREE MONTHS ENDED MARCH 31, 2015

(unaudited)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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BLUE WATER GLOBAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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BLUE WATER GLOBAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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BLUE WATER GLOBAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(unaudited)

NOTE 1 – Summary of Significant Accounting Policies

A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.

 

Business and organization

Blue Water Global Group, Inc. (“Company” or “Blue Water”) is an emerging growth company that was incorporated under the laws of the State of Nevada on March 3, 2011 under the name Blue Water Restaurant Group, Inc.  Blue Water amended its Articles of Incorporation on June 13, 2013 to change its name to Blue Water Global Group, Inc.  The Company is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand and is preparing to launch a line of premium rums which include its flagship rum Blue Water Ultra-Premium Rum™ and aged spiced Blue Water Caribbean Gold™ Premium Rum.  Additionally, the Company is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board (“OTCBB”).

Interim Financial Statements

 

The unaudited condensed interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

The condensed balance sheet as of December 31, 2014 has been derived from audited financial statements.

 

Operating results for the three months ended March 31, 2015 are not necessarily indicative of results that may be expected for the year ending December 31, 2015. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2014 filed with the Company’s Form 10-K with the Securities and Exchange Commission on April 13, 2015.

 

Basis of presentation

The Company is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand and is preparing to launch a line of premium rums which include its flagship rum Blue Water Ultra-Premium Rum™ and aged spiced Blue Water Caribbean Gold™ Premium Rum.  Additionally, the Company is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board (“OTCBB”). The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. In addition, the Company has stockholders' deficiencies at March 31, 2015 and requires additional financing to fund future operations. Further, there is no assurance that approval of the Company’s products will be received and that the Company will be able to generate cash flow to fund operations from its commercial products.

 

The above factors raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty.

Use of estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the

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financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of September 30, 2014 and December 31, 2013, the Company had no cash equivalents.

Revenue Recognition

The Company recognizes revenue on four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.  Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectability of those fees. Revenue is generally recognized upon shipment.

Revenue recognized during the three months ended March 31, 2015 related to sales of its of distilled spirits, which includes its flagship Blue Water Ultra Premium Rum™ and aged spiced Blue Water Caribbean Gold™ Premium Rum product.

Inventory/cost of sales

The Company maintains an inventory, which consists primarily of distilled spirits, manufactured and packaged by outside vendors, including component parts such as packaging and delivery to the Company’s warehouse.  The average cost method is utilized in valuing the inventory, and is stated at the lower of cost or market.  

As of March 31, 2015, the Company’s inventory, comprised of distilled spirits, available for sale was $103,159.  During the three months ended March 31, 2015, the cost of delivered products sold in the current period was $1,729.

Long-Term Investments

The Company accounts for its long-term investments, which are designated as available-for-sale securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that available-for-sale securities be carried at fair value with unrealized gains and losses, net of tax, included in stockholders' equity under accumulated other comprehensive income (loss).  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  As of March 31, 2015 and December 31, 2014, the Company had long-term investments consisting of (i) 20,000,000 shares of Stream Flow Media, Inc. and (ii) a net 15% interest in Next Level Hockey, LLC. During the three months ended March 31, 2015, the Company recorded associated costs of the investment of $3,502 as a charge to additional paid in capital.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:

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The estimated fair values of the Company’s financial instruments are as follows:

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Net Loss per Share Calculation

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  The Company excludes all potentially dilutive securities from its diluted net loss per share computation since their effect would be anti-dilutive because the Company recorded a loss for the three months ended March 31, 2015 and 2014.

Beneficial Conversion Feature

From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features.  A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt.  In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital.  The debt discount is amortized to interest expense over the life of the note using either the straight line method or the effective interest method.

Income Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount

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that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.

 

Accounting for Derivative Instruments

All derivatives have been recorded on the balance sheet at fair value based on the Black-Scholes calculation.  These derivatives, including embedded derivatives in the Company's convertible notes which have floating conversion prices based on changes to the quoted price of the Company's common stock and common stock equivalents tainted as a result of the derivative, are separately valued and accounted for on the Company's balance sheet.  Fair values for exchange traded securities and derivatives are based on quoted market prices.  Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.

NOTE 2 – Going Concern

The Company’s independent registered public accounting firm has issued a going concern opinion in their audit report dated April 13, 2015, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 13, 2015.  This means that the Company’s auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  The Company does not anticipate generating significant revenues until it is able to open its first restaurant presently under development in St. Maarten, Dutch West Indies and have its line of premium rums widely accepted by consumers.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United State of America, which contemplate continuation of the Company as a going concern.  The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception.  Further, as of March 31, 2015, the Company had an accumulated net loss of ($7,087,023).  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

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NOTE 3 – Convertible Promissory Notes

Convertible notes payable are comprised of the following:

		March 31, 2015				December 31, 2014
Convertible promissory notes, due May 28, 2015, net of unamortized debt discount of $28,524		$	-			$	24,476
Convertible promissory note, due  July 3, 2015, net of unamortized debt discount of $25,440			-				17,560
Convertible promissory note, due August 17, 2015, net of unamortized debt discount of $31,423 and $51,768, respectively			33,577				13,232
Convertible promissory note, due  August 19, 2015, net of unamortized debt discount of $29,052 and $47,596, respectively			27,198				8,654
Convertible promissory note, due May 19, 2015, net of unamortized debt discount of $76,796			-				23,204
Convertible promissory note, due  December 22, 2015, net of unamortized debt discount of $36,438 and $48,767, respectively			13,562				1,233
Convertible promissory note, due  December 22, 2015, net of unamortized debt discount of $72,877 and $97,534, respectively			27,123				2,466
Convertible promissory note, due November 14, 2015, net of unamortized debt discount of $23,086 and  $31,457, respectively			10,414				2,043
Convertible promissory note, due  December 1, 2015, net of unamortized debt discount of $32,493 and $44,430, respectively			17,507				5,570
Convertible promissory note, due November 13, 2015, net of unamortized debt discount of $34,206 and $47,767, respectively			20,794				7,233
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $20,406 and $27,310, respectively			7,594				690
Convertible promissory note, due July 27, 2015, net of unamortized debt discount of $65,193			34,807				-
Convertible promissory note, due January 26, 2016, net of unamortized debt discount of $41,233			8,767				-
Convertible promissory note, due November 17, 2016, net of unamortized debt discount of 66,846			12,154				-
Convertible promissory note, due February 20, 2016, net of unamortized debt discount of $103,605			12,395				-
Convertible promissory note, due February 9, 2016, net of unamortized debt discount of $93,205			14,795
Total			240,687				106,361
Less current portion			(240,687	)			(106,361)
Long term portion		$	–			$	-

2015 Notes:

JSJ Investments, Inc. Note

On January 27, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (“JSJ Note”) in the principal amount $100,000, net proceeds of $95,000 after taking into consideration an Original Issue Discount (“OID”) of $5,000.  The JSJ Note matures on July 27, 2015.  The JSJ Note is convertible at 50% of the lowest trading stock price of Blue Water’s common stock during the thirty trading day period prior to the conversion date after 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).   

At the inception of the JSJ Note, the Company determined the aggregate fair value of $598,055 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 0.50 years, and (5) estimated fair value of the Company’s common stock of $0.107 per share.

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The determined fair value of the embedded derivative of $598,055 was charged as a debt discount up to the net proceeds of the note with the remainder, $505,055, charged to current period operations as non-cash loss on change in derivative liability.

At March 31, 2015, the Company marked to market the fair value of the derivatives of the JSJ Note discussed above and determined a fair value of $684,254. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% to 235%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.32 years, and (5) estimated fair value of the Company’s common stock of $0.082 per share.

The Company recorded a loss on change in derivative liability of $86,199 for the three months ended March 31, 2015.

As of March 31, 2015, the outstanding balance due on the JSJ Note was $100,000.  During the three months ended March 31, 2015, this note incurred $34,807 in amortization expenses that was recorded in the financial statements as interest expense.  Further, as of March 31, 2015, the remaining unamortized debt discount was $65,193.

Union Capital, LLC note

On January 26, 2015,  the Company entered into an agreement for the sale of a Convertible Promissory Note (“Union”) in the principal amount $50,000 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between Union Capital LLC. (“Union”) and Blue Water.  The Union note closed on January 26, 2015 and matures on January 26, 2015 and is convertible at 55% of the average of the lowest closing bid price of Blue Water’s common stock during the twenty trading day period prior to the conversion date after 180 days.  

At the inception of the Union note, the Company determined the aggregate fair value of $389,282 of embedded derivatives. The fair value of the embedded derivatives was determined using the Black Scholes Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 277% , (3) weighted average risk-free interest rate of 0.18%, (4) expected life of 1.00 years, and (5) estimated fair value of the Company’s common stock of $0.09 per share.

The determined fair value of the embedded derivative of $389,282 was charged as a debt discount up to the net proceeds of the note with the remainder, $339,282, charged to current period operations as non-cash loss on change in derivative liability.

At March 31, 2015, the Company marked to market the fair value of the derivatives of the Union note discussed above and determined a fair value of $98,598. The fair value of the embedded derivatives was determined using Black Scholes model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 270.11%, (3) weighted average risk-free interest rate of 0.26%, (4) expected life of 0.82 years, and (5) estimated fair value of the Company’s common stock of $0.082 per share.

The Company recorded a gain on change in derivative liability of $290,684 for the three months ended March 31, 2015.

As of March 31, 2015, the outstanding balance due on the Union note was $50,000.  During the three months ended March 31, 2015, this note incurred $8,767 in amortization expenses that was recorded in the financial statements as interest expense.  Further, as of March 31, 2015, the remaining unamortized debt discount was $41,233.

KBM Worldwide Note

On February 17, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (“KBM”) in the principal amount $79,000 with an interest rate of 8% per annum pursuant to the terms of a Securities Purchase Agreement between KBM Worldwide, Inc. (“KBM”), a New York corporation, and Blue Water.  The KBM Note 1 matures on November 17, 2015.  The KBM Note is convertible at 58% of the average of the lowest three trading prices of Blue Water’s common stock during the ten trading day period prior to the conversion date after 180 days.  In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).  

At the inception of the KBM Note, the Company determined the aggregate fair value of $110,668 of embedded derivatives. The fair value of the embedded derivatives was determined using the Bionomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.75 years, and (5) estimated fair value of the Company’s common stock of $0.129 per share.

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The determined fair value of the embedded derivative of $110,668 was charged as a debt discount up to the net proceeds of the note with the remainder, $31,668, charged to current period operations as non-cash loss on change in derivative liability.

At March 31, 2015, the Company marked to market the fair value of the derivatives of the KBM Note discussed above and determined a fair value of $137,009. The fair value of the embedded derivatives was determined using Binomial Option Pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.75 years, and (5) estimated fair value of the Company’s common stock of $0.1085 per share.

The Company recorded a gain on change in derivative liability of $211 for the three months ended March 31, 2015.

As of March 31, 2015, the outstanding balance due on the KBM note was $79,000.  During the three months ended March 31, 2015,  this note incurred $12,154 in amortization expenses that was recorded in the financial statements as interest expense.  Further, as of March 31, 2015, the remaining unamortized debt discount was $66,846.

JDF Capital, Inc. Note

On February 20, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (“JDF Note”) in the principal amount $116,000, net proceeds of $106,000 after taking into consideration an Original Issue Discount (“OID”) of $10,000.  The JDF Note matures on February 20, 2016.  The JDF Note is convertible at 40% of the lowest trading stock price of Blue Water’s common stock during the twenty five trading day period prior to the conversion date 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).   

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At the inception of the JDF Note, the Company determined the aggregate fair value of $353,080 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 1.00 years, and (5) estimated fair value of the Company’s common stock of $0.11 per share.

The determined fair value of the embedded derivative of $353,080 was charged as a debt discount up to the net proceeds of the note with the remainder, $30,412, charged to current period operations as non-cash loss on change in derivative liability.

At March 31, 2015, the Company marked to market the fair value of the derivatives of the JDF Note discussed above and determined a fair value of $249,787. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% to 235%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.89 years, and (5) estimated fair value of the Company’s common stock of $0.082 per share.

The Company recorded a loss on change in derivative liability of $7,375 for the three months ended March 31, 2015.

As of March 31, 2015, the outstanding balance due on the JDF Note was $116,000.  During the three months ended March 31, 2015, this note incurred $12,395 in amortization expenses that was recorded in the financial statements as interest expense.  Further, as of March 31, 2015, the remaining unamortized debt discount was $103,605.

Blue Citi, LLC. Note

On February 9, 2015, the Company entered into an agreement for the sale of a Convertible Promissory Note (“Blue Note”) in the principal amount $108,000, net proceeds of $106,000 after taking into consideration an Original Issue Discount (“OID”) of $6,000.  The JDF Note matures on February 9, 2016.  The Blue Note is convertible at 60% of the lowest daily closing bid price of Blue Water’s common stock during the twenty trading day period prior to the conversion date 180 days. In addition, the Promissory Note provides for changes in conversion price should certain events occur (as defined).   

At the inception of the Blue Note, the Company determined the aggregate fair value of 289,664 of embedded derivatives. The fair value of the embedded derivatives was determined using the Lattice Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 223% , (3) weighted average risk-free interest rate of 0.15%, (4) expected life of 1.00 years, and (5) estimated fair value of the Company’s common stock of $0.096 per share.

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The determined fair value of the embedded derivative of $289,664 was charged as a debt discount up to the net proceeds of the note with the remainder, $189,664, charged to current period operations as non-cash loss on change in derivative liability.

At March 31, 2015, the Company marked to market the fair value of the derivatives of the Blue note discussed above and determined a fair value of $268,870. The fair value of the embedded derivatives was determined using Lattice Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 223% to 235%, (3) weighted average risk-free interest rate of 0.25%, (4) expected life of 0.87 years, and (5) estimated fair value of the Company’s common stock of $0.082 per share.

The Company recorded a gain on change in derivative liability of $20,794 for the three months ended March 31, 2015.

As of March 31, 2015, the outstanding balance due on the JDF Note was $106,000.  During the three months ended March 31, 2015, this note incurred $14,795 in amortization expenses that was recorded in the financial statements as interest expense.  Further, as of March 31, 2015, the remaining unamortized debt discount was $93,205.

NOTE 4 – STOCKHOLDERS’ EQUITY

Preferred stock

 

The Company has authorized 5,000,000 shares of preferred stock, $0.001 par value.  The Company’s Board of Directors is authorized, without further action by the shareholders, to issue shares of preferred stock and to fix the designations, number, rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms.

As of March 31, 2015 the Company had designated up to 1,000,000 shares of the authorized preferred stock as the Series A preferred stock, $0.001 per share.  As of March 31, 2015 and December 31, 2014, the Company has 150,000 shares of Series A preferred stock issued and outstanding.

 

Common stock

 

The Company has authorized 700,000,000 shares of common stock, with a par value of $0.001 per share. As of March 31, 2015 and December 31, 2014, the Company has 120,939,565 and 126,206,213, respectively, shares of common stock issued and outstanding.

During the three months ended March 31, 2015, 12,500,000 previously issued shares of the Company’s common stock were returned and canceled.  The returned shares were recorded at $-0- value.

During the three months ended March 31, 2015, the Company issued an aggregate of 3,900,000 shares of its common stock for board compensation at a fair value of $428,610 based on the closing stock price at date of grant.

During the three months ended March 31, 215, the Company issued 3,333,334 shares of its common stock for services rendered at a fair value of $273,334 based on the closing stock price at date of grant.

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NOTE 5 – INVESTMENTS

Long-Term Investments; Available-For-Sale Securities

The following table summarizes the Company’s long-term Available-For-Sale (AFS) Securities as of March 31, 2015 and December 31, 2014:

	As of March 31, 2015 and December 31, 2014
		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Equity securities (1)	$	-	$	200,000	$	-	$	200,000
Total	$	-	$	200,000	$	-	$	200,000

(1)

The Company’s long-term AFS securities consisted of 20,000,000 shares of Stream Flow Media, Inc. which were valued at $200,000 and a net 15% interest in Next Level Hockey, LLC which was valued at $-0-.

All of our investments, excluding trading securities, are subject to periodic impairment review.  The impairment analysis requires significant judgment to identify events or circumstances that would likely have significant adverse effect on the future value of the investment.  We consider various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, forecasted recovery, the financial condition and near-term prospects of the investee, and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

NOTE 6 – STRATEGIC ALLIANCE AGREEMENT WITH TAURUS FINANCIAL PARTNERS, LLC

On June 21, 2013 the Company entered into a Strategic Alliance Agreement with Taurus Financial Partners, LLC (“Taurus”).  Under this Strategic Alliance Agreement the Company was granted the exclusive right to participate in Taurus’s future Registered Spin-Off transactions.

In a typical Registered Spin-Off transaction, the Company will acquire between 10 – 15% of an operating business that is in the process of “going public” on the OTC Bulletin Board.  Taurus will then register these shares with the Securities and Exchange Commission (“SEC”).  Once Taurus has registered these shares with the SEC, the Company will “spin-off” approximately one-third of them to its then stockholders in the form of a special stock dividend.

Stream Flow Media, Inc.

On December 2, 2013 the Company entered into its first Registered Spin-Off transaction pursuant to the Strategic Alliance Agreement with Stream Flow Media, Inc., a Colorado corporation (“Stream Flow”).  As per the terms of this transaction, Stream Flow issued 20,000,000 shares of its common stock, $0.001 par value, to Blue Water, which represents approximately 20% of Stream Flow’s issued and outstanding shares of common stock as of April 6, 2015 in return for the Company agreeing to pay all of Stream Flow’s expenses related to obtaining a listing on the OTCBB.

 

Stream Flow is presently in the process of preparing and filing its Form 15c2-11 with FINRA to obtain its listing on the OTCBB.  Once Stream Flow obtains its listing on the OTCBB, and upon approval by both the SEC and FINRA, the Company will issue a special one-time stock dividend of approximately 25%, or 5,000,000, of its Stream Flow shares to its shareholders.  The remaining Stream Flow shares will be sold by the Company over an 18-24 month period with the net proceeds going towards financing new units of its Blue Water Bar & Grill™ restaurant concept and expanding the distribution and marking of its premium distilled spirits.

The Company accounts for its Stream Flow asset as Available-For-Sale (AFS) securities that are carried in the financial statements at fair value.  Changes in fair value are recorded in the financial statements as an unrealized gain (loss) in Other Comprehensive Income (OCI).

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During the three months ended March 31, 2015, the Company had accumulated $3,502 in costs related to the Stream Flow shares, recorded to additional paid in capital.  At March 31, 2015 and December 31, 2014, the Company recorded the investment at fair value relating to its stock holdings based on expected market listing. Accordingly, the Company carried the Stream Flow shares at $200,000 valuation on the balance sheet as of March 31, 2015 and December 31, 2014.

Next Level Hockey, LLC

On September 5, 2014 the Company entered into a definitive agreement with Next Level Hockey, LLC (“Next Level”), a New Jersey limited liability company.  As per the terms of this transaction, the Company will receive a net 15% equity interest in Next Level when it goes public on the OTCBB in return for the Company agreeing to pay all of Next Level’s expenses related to obtaining a listing on the OTCBB.

NOTE 7 – SUBSIDIARIES

As of March 31, 2015, the Company had the following wholly-owned subsidiaries:

Name of Subsidiary		Place of Incorporation
Blue Water Bar & Grill, N.V. (1)		St. Maarten, Dutch West Indies
Blue Water Beverage Brands, Ltd. (2)		British Virgin Islands
BWG Investments & Development, Ltd. (3)		British Virgin Islands

(1)

As of March 31, 2015, Blue Water Bar & Grill, N.V. (i) was in good standing with the government of St. Maarten, (ii) had no assets or liabilities, (iii) maintained an operating Business License, and (iv) maintained two Managing Director’s Licenses.

 

(2)

As of March 31, 2015, Blue Water Beverage Brands, Ltd. (i) was in good standing with the government of the British Virgin Islands, (ii) had no assets or liabilities, and (iii) maintained an operating Business License enabling it to conduct operations both inside and outside of the BVI.

(3)

As of March 31, 2015, Blue Water Beverage Brands, Ltd. (i) was in good standing with the government of the British Virgin Islands, (ii) had no assets or liabilities, and (iii) maintained an operating Business License enabling it to conduct operations both inside and outside of the BVI.

NOTE 8 – RELATED PARTY TRANSACTIONS

As of March 31, 2015, the Company operated out of office space that is being provided to us by our Vice President, Michael Hume, free of charge.  There is no written agreement or other material terms relating to this arrangement.

Additionally, a significant portion of the Company’s expenses have been paid by Taurus Financial Partners, LLC (“Taurus”), an independent service provider that currently provides SEC EDGAR compliance and filing services to the Company, and have been accounted for under the accounts payable to a related party line item.  As of March 31, 2015 and December 31, 2014, the Company’s accounts payable to Taurus aggregated $512,590 and $494,718, respectively.

As of March 31, 2015 and December 31, 2014, Taurus owned 16,000,000 shares of the Company’s issued and outstanding common stock and 150,000 shares of the Company’s issued and outstanding preferred stock, which represented 12.7% and 100% of each class of securities, respectively.  It is important to note that our President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer at Taurus and has voting disposition over the controlling block of Taurus shares.  

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NOTE 9 – SUBSEQUENT EVENTS

Designation of Series B Preferred Stock

On April 13, 2015 our Board of Directors authorized a class of preferred stock consisting of up to 1,300,000 shares and designated it Series B Preferred Stock.  The Series B Preferred Stock has the following terms and rights:

Rank:  The Series B Preferred Stock shall rank superior to Blue Water’s common stock.  Other classes of preferred stock shall rank superior to the Series B Preferred Stock.

Dividends.  The Series B Preferred Stock is eligible for all legal dividends as may be approved by Blue Water’s Board of Directors.  In the event a dividend is declared across multiple classes of stock, the amount of any dividend to be received by holders of the Series B Preferred Stock shall be calculated on a fully-diluted, pro-rata basis with the other classes of stock participating in said dividend.

Voting Rights.  Holders of the Series B Preferred Stock shall have no voting rights.

Conversion.   The Series B Preferred Stock may not be converted into any other class or classes of stock.

Redemption by Corporation. Blue Water has no redemption rights over the Series B Preferred Stock.

One-Time Special Stock Dividend

Blue Water’s Board of Directors has approved a special one-time stock dividend of one (1) share of Series B Preferred Stock for every one-hundred (100) shares of common stock held.  Fractional amounts will be rounded to the nearest whole number.

The tentative record and payable dates for this one-time special dividend are May 8, 2015 and May 15, 2015, respectively, pending final approval by FINRA.

Issuance of Convertible Notes

On May 8, 2015, the Company concluded a coordinated round of bridge financing involving eight investors that netted Blue Water $580,000 in bridge financing.  Blue Water intends to use the proceeds for:

·

Construction expenses related to its St. Maarten, Dutch West Indies Blue Water Bar & Grill™;

·

General working capital; and

·

To redeem certain outstanding convertible promissory notes.

The table below summarizes each investor and the amount of financing received in this round of bridge financing.  A more comprehensive disclosure relating to this round of financing is hereby incorporated by reference to the Form 8-K filed with the SEC on May 11, 2015.

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Redemption of Outstanding Convertible Notes

As of May 11, 2015, the Company repaid and eliminated six outstanding convertible notes.  A more comprehensive disclosure relating to these note redemptions is hereby incorporated by reference to the Form 8-K filed with the SEC on May 12, 2015.  The table below summarizes each of the convertible notes the Company has repaid since March 31, 2015:

No other material events or transactions have occurred during this subsequent event reporting period which required recognition or disclosure in the financial statements.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our independent registered public accounting firm has issued a going concern opinion in their audit report dated April 13, 2015, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 13, 2015.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  We do not anticipate generating significant revenues until we are able to open our first restaurant and have our distilled spirits widely accepted by consumers.  Accordingly, we must raise additional cash from sources other than operations.

To meet our need for cash we are continually exploring new sources of financing, including raising funds through a secondary public offering, a private placement of securities and/or loans.  If we are unable to secure additional financing, we will either have to suspend operations until we do raise the cash or cease operations entirely.

The following discussion should be read in conjunction with our financial statements and the notes thereto and the other information included in this Quarterly Report as filed with the SEC on Form 10-Q.

Limited Operating History; Need for Additional Capital

There is limited historical financial information about us upon which to base an evaluation of our performance.  We are an emerging growth business with limited operating history.  We cannot guarantee that we will be successful in our business operations.  Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in marketing costs, increases in administration expenditures associated with daily operations, increases in accounting and audit fees, and increases in legal fees related to filings and regulatory compliance.

 

To become profitable and competitive, we have to successfully open operating restaurant properties and have our distilled spirits accepted by consumers.  We anticipate relying on equity sales of our common stock in order to continue to fund our business operations until we are able to generate sufficient revenues to cover our operating expenses, which may never happen.  Issuances of additional shares will result in dilution to our then existing stockholders.  There is no assurance that we will be able to make any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

 

We are continually exploring new sources of financing to meet our need for additional cash, including raising funds through sales of our equity securities and loans.  We cannot provide any assurances that our efforts to secure additional financing will be successful.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Further, future equity financing could result in additional and substantial dilution to existing shareholders.

Plan of Operations

Blue Water was incorporated on March 3, 2011 in the State of Nevada.  We are developer of casual dining restaurant properties and premium distilled spirits.  Blue Water is currently developing a chain of casual dining restaurants in popular tourist destinations throughout the Caribbean region under the Blue Water Bar & Grill™ brand and selling a line of premium rums which include its flagship rum Blue Water Ultra Premium Rum™ and aged spiced Blue Water Caribbean Gold™ Premium Rum in St. Maarten, Dutch West Indies and Anguilla, British West Indies.  Additionally, Blue Water is engaged in making strategic equity investments in promising businesses that are in the early stages of obtaining their own listing on the OTC Bulletin Board.

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The projected costs and other related expenses are estimates made by our management and our actual costs related to opening our proposed restaurant may differ significantly.

In addition to the foregoing, and unless otherwise noted, all of the cost estimates and forecasts throughout our business plan are mere estimates made by our management.  Our actual costs related to opening and operating the proposed restaurants may differ significantly from our estimates, which could have a negative impact on our overall business, cause our business to fail, and result in you losing all of your investment.

Blue Water Structure and Areas of Operation

Blue Water Bar & Grill™

The Blue Water Bar & Grill™ restaurant concept is the Perfectly Caribbean^SM experience featuring a casual, open air Caribbean themed restaurant designed to offer customers a distinctive and relaxing island dining experience.  Central to each restaurant will be a large covered outside patio area where customers can enjoy their drinks and food while overlooking a beautiful water view.  The patio area will feature an inviting island styled walk up (and in some cases, swim up) bar and a small stage area for live musical performances by local musicians and dancing.  Each restaurant will have an open aired kitchen so customers can see their food being prepared.

Each restaurant will begin serving breakfast at 7am.  On weekends the restaurant will promote an American styled breakfast buffet and feature a do-it-yourself Bloody Mary station.  Lunch service will commence at 11am and will feature handmade burgers, gourmet sandwiches and salads, and Caribbean jerk styled dishes.  Dinner service will start at 5pm and will feature hand-cut aged Certified Angus steaks and prime rib, fresh seafood caught by local fishermen, hand tossed pizzas, and specialty homemade desserts.  The restaurant will close at 11pm nightly and the bar will close later at the manager’s discretion.

During weekdays the bar will host a daily happy hour (4pm – 6pm) that will offer reduced priced drinks and appetizer specials.  When the sun sets the patio will be outlined by tiki torches, which will promote a fun nighttime island atmosphere while helping ward off unwanted insects such as mosquitoes.

In addition, each restaurant will offer its customers specialty drinks in souvenir glasses, mugs, and shot glasses that come with the drink.  These items, along with fun and unique t-shirts and other souvenirs, will be available for retail purchase in a separate souvenir hut that will be approximately 130 square feet in size.  These souvenir items will be primarily marketed to the tourist customers.  Based on our preliminary discussions with an importer of these types of souvenir items, we estimate selling this merchandise at a 300% - 600% retail markup, depending on the particular item.

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While the required level of inventory may vary from location to location, we estimate that our initial location in St. Maarten, Dutch West Indies will require an initial inventory of $17,000.  This will be comprised of $10,000 in food and perishables, $4,000 in liquor, and $3,000 in merchandise.  Food and liquor inventory will be replenished once or twice a week, depending on sales volumes, and merchandise every two months due to the longer lead time because it will be imported from China.

St. Maarten Blue Water Bar & Grill™

In February 2015 Blue Water broke ground on its first Blue Water Bar & Grill™ in St. Maarten, Dutch West Indies.  The beachfront building site is located in the pristine eco-friendly Indigo Bay development and is the second restaurant approved for beachfront construction.  The first Indigo Bay restaurant, Kokomo, opened in December 2013 and has been a tremendous success to date.  For more information visit their respective websites at www.indigo-bay.com and www.kokomo-sxm.com.

Key elements to the design and site location include:

·

Blue Water's building site (Lot #L04) measures approximately 1,552 square meters (16,706 square feet) and is located on a picturesque white sand beach.

·

This Blue Water Bar & Grill™ location will feature a large, open-aired tiki roof, swimming pool with swim up bar stools, two fire pits, and beach and pool lounge chairs with full drink and food service.

·

The restaurant's foot print measures approximately 415 square meters (4,467 square feet) and seats up to 203 people:

·

98 under the main tiki roof, 64 under tropical cover, 26 at the bar, and 15 at the swim up bar.

·

Indigo Bay is an eco-friendly commercial and residential development encompassing approximately 150 acres of lush tropical and beachfront land.

·

Indigo Bay is St. Maarten's newest and closest attraction to the Port of St. Maarten and is just a quick ride by water taxi for cruise ship passengers.

·

Approximate GPS coordinates: 18⁰01'17.5 North and 63⁰04'33 West.

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Keys for Success

To better achieve our business objectives and successfully compete with other restaurants, we have developed the following focal points and strategies we anticipate implementing in all of our future restaurants:

Create a Fun, Energetic, Destination Drinking and Dining Experience.  We wish to create and promote a fun and socially open atmosphere whereby our customers can, if they choose to do so, openly interact with one another.  Topics of discussion and frequent interest will often center around where each other is from, what activities have they done while on the island, and giving and receiving recommendations for future activities while on the island; sometimes the floor and bar staff will participate in these discussions and offer their own words of advice.  We intend to accomplish this by utilizing sectional floor and foot traffic planning, whereby the bar area will promote social interaction among customers, a stage area will feature local live entertainment performers to create a lively and festive atmosphere, and more intimate dining tables will be located further in the back to provide separation for those who just wish to dine alone and enjoy the island atmosphere.  We believe that if we are successful at achieving this goal, new customers – tourists, “local” ex-patriots and native locals alike – will become repeat, or “regular”, customers and subsequently promote the restaurant by word-of-mouth to their friends and family.

Distinctive Concept.  In each restaurant we wish to create a fun and consistent experience for our customers centered around our full bar service, dining offerings, and daily entertainment.  The restaurant’s concept will be carried throughout our customers’ entire visit and will involve all aspects of the experience, including the exterior design of the building, interior layout and decorum, employee greetings and uniforms, specialty drinks and menu items, and fun and creative souvenirs such as interestingly shaped drink glasses and bright and flamboyant t-shirts that can remind the customer of their vacation or make an excellent gift for someone back home.

Comfortable Adult Atmosphere.  Our restaurants will be primarily adult orientated.  While children will be welcomed during daytime hours as long as they are accompanied by a responsible adult at all times during their visit, no one under 21 years of age (or the minimum legal drinking age as established by statute) will be allowed into our restaurants after 10pm.  We believe

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that this policy will help maintain a fun and relaxed atmosphere that appeals to adult customers, and will help attract groups such as private parties and business organizations.

High Standard of Customer Service.  Because service is one the key areas restaurants differentiate themselves from one another – and a constant source of either compliments or complaints from customers – we intend to foster a high level of customer service among our employees, ranging from the general manager to the greeters, through intense training (cross training for all manager level employees and a one-week training course, complete with required testing on all food and drink offerings, operational procedures, and computer checkout for all other employees), constant monitoring (from the on-duty manager and surprise visits from “secret shoppers”), and emphasizing consideration of our customers first and foremost in all decisions.  From the moment a customer walks into the front door, we want them to experience a high level of guest service provided by a knowledgeable, energetic staff.  Bar tenders will be required to be able to free pour simultaneously from multiple liquor bottles and perform “flare” techniques (flipping, tossing, and twirling of liquor bottles) for our customers’ entertainment; greeters and servers will be required to introduce customers to the concept, explain the drink and entree menus and daily specials, and generally set the stage for a fun and memorable experience for them.

Provide Dining Value.  We believe that our restaurants should provide our customers with interesting, high quality, and generously portioned (covering the entire plate) menu items that are aesthetically appealing and result in the customer leaving fully satisfied.  Complementing the dining aspect, we intend to offer the customer a unique variety of original drinks, each designed to perpetuate and immerse the customer in the restaurant’s overall concept.  It is our goal to generate at least a US$28 average check per guest, inclusive of food and drinks.  We estimate that our overall gross sales will be comprised of 65% food and 35% drinks.  We anticipate achieving and maintaining a 30% food cost and 18% liquor cost, which relates to our actual cost of the product compared to the gross revenue the product generates.  For example, if we sold a fish entree for $20 our actual cost would be $6 and our gross profit would be $14.  Prices for entrees will start at around $12 for a hamburger and rise to $42 for a prime rib steak dinner; prices for drinks will start at $3 for beer, $6 for basic well mixed drinks, and $8 for specialty drinks.  These price points are competitive with the existing restaurants our management team has scouted in the Simpson Bay area of St. Maarten, Dutch West Indies, where we intend to open our first Blue Water Bar & Grill™ that will cater to the tourist and local ex-patriot alike.

It is important to note that although we aspire to operate at or below the above food and liquor costs, we cannot guarantee that we will ever achieve such food or liquor costs or, if achieved, will be able to maintain them.

Operations and Management

Our ability to effectively manage an operation including high volume restaurants (annual gross sales of US$1,000,000 or more) with live entertainment offerings is critical to our overall success.  In order to maintain quality and consistency at each of our future restaurants we must carefully train and properly supervise our personnel and the establishment of, and adherence to, high standards relating to personnel performance, food and beverage preparation, entertainment productions and equipment, and maintenance of the restaurant facilities.  We believe our current management is capable of overseeing our planned growth over the next two years.  While staffing levels will vary from restaurant to restaurant depending on actual sales volumes, we anticipate our typical restaurant management staff to be comprised of a general manager, a kitchen manager (who also serves as the head chef) and a bar manager (who also serves as the head bartender); the kitchen manager and bar manager will also act as assistant general managers when the general manager is off-duty and will receive a slightly higher base salary compared to our other chefs and bartenders to compensate for their added responsibilities.

Recruiting.  We will actively recruit and select individuals who share our passion for customer service.  Our selection process includes testing and multiple interviews to aid in the selection of new employees, regardless of their prospective position.  We will offer a competitive compensation plan to our managers that includes a base salary, bonuses for achieving performance objectives, and possibly incentive stock options once they have worked for us for at least one full year.  For example, the general manager in our initial Blue Water Bar & Grill™ restaurant will most likely be offered a base salary of $1,500 a month, plus up to $1,000 a month in additional performance incentives for achieving minimum gross sales and exceeding the minimum targeted food, liquor, and labor costs, as determined by our executive management team.  In addition, all employees are entitled to discount meals at any of our future restaurants.

Training.  We believe that proper training is the key to exceptional customer service.  Each new management hire will go through an extensive training program, which will include cross-training in all management duties.  All non-management new hires will go through a standard training program where they will learn and be tested on all of our food and drink offerings, operational procedures, and our point-of-sale (POS) computer system.

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Management Information Systems (MIS).  All of our future restaurants will be equipped with a variety of integrated management information systems.  These systems will include an easy-to-use point-of-sale (POS) computer system which facilitates the movement of customer food and drink orders between the customer areas and kitchen and bar operations, controls cash, handles credit card authorizations, keeps track of sales on a per employee basis for incentive awards purposes, and provides on-site and executive level management with real-time sales and inventory data.  Additionally, we intend to implement a centralized accounting system that will include a food cost program and a labor scheduling and tracking program.  Physical inventories of food and drink items will be performed on a weekly basis.  Further, daily, weekly, and monthly financial information will be provided to executive level management for analysis and comparison to our budget and to comparable restaurants.  By closely monitoring each restaurant’s gross sales, cost of sales, labor, and other cost trends we will be better able to control our costs, inventory levels, and identify problems with individual operations, if any, early on.

Secret Shopper.  Because we believe exceptional customer service is paramount to our success, we intend to implement a “secret shopper” program to monitor the quality control at all of our future restaurants.  Secret shoppers are independent persons who test the quality of our food, drink, and service as paying customers without the knowledge of the restaurant’s management or employees.  Secret shoppers then report their unbiased experiences to our executive level management.

Blue Water Premium Rums

Through its wholly-owned subsidiary, Blue Water Beverage Brands, Ltd., Blue Water has developed a line of premium rums that are produced and bottled in the Dominican Republic.  These rums are currently sold in St. Maarten, Dutch West Indies and Anguilla, British West Indies.  Blue Water intends to expand these brands in 2015 through distribution channels in this Caribbean region, including the exclusive and influential St. Barths, French West Indies.  Blue Water will continue expanding these brands throughout the Caribbean and, ultimately, export them into the United States in early 2016.

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Award Winning

Blue Water participated in the Miami Rum Renaissance Trade Expo (www.rumrenaissance.com) and associated blind tasting competition in April 2015 – the first ever rum competition for Blue Water’s premium rums – and was awarded the RumXP Gold Medal for its Blue Water Caribbean Gold™ Premium Rum.

Strategic Alliances and Investment Holdings

On June 21, 2013 Blue Water entered into a Strategic Alliance Agreement with Taurus Financial Partners, LLC (“Taurus”).  Under this Strategic Alliance Agreement Blue Water was granted the exclusive right to participate in Taurus’s future Registered Spin-Off transactions.

In a typical Registered Spin-Off transaction, Blue Water will acquire between 15 – 20% of an operating business that is in the process of “going public” on the OTC Bulletin Board (“OTCBB”).  Taurus will then register these shares with the Securities and Exchange Commission (“SEC”).  Once Taurus has registered these shares with the SEC, Blue Water will “spin-off” a portion of them to its then stockholders in the form of a special stock dividend.

Blue Water anticipates participating in three or four of these transactions each fiscal year.  It is important to note that Blue Water’s President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer of Taurus.

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Stream Flow Media, Inc.

On December 2, 2013 Blue Water entered into the first of these types of transactions under this Strategic Alliance Agreement with Stream Flow Media, Inc., a Colorado corporation (“Stream Flow”).  As per the terms of this transaction, Stream Flow issued 20,000,000 shares of its common stock, $0.001 par value, to Blue Water, which represents approximately 20% of Stream Flow’s issued and outstanding shares of common stock as of April 6, 2014 in return for Blue Water agreeing to pay all of Stream Flow’s expenses related to obtaining a listing on the OTCBB.

 

Stream Flow is presently in the process of preparing and filing its Form 15c2-11 with FINRA, the second step in obtaining a listing on the OTCBB.  Once Stream Flow obtains its listing on the OTCBB, and upon approval by both the SEC and FINRA, Blue Water will issue a special one-time stock dividend of approximately 25%, or 5,000,000, of its Stream Flow shares to its then shareholders.  The remaining Stream Flow shares will be sold by Blue Water over an 18-24 month period with the net proceeds going towards financing new units of its Blue Water Bar & Grill™ restaurant concept.

Blue Water accounts for its Stream Flow shares as Available-For-Sale (AFS) securities that are valued at fair value.  Changes in fair value are recorded in the financial statements as additions (subtractions) to equity.

During the three months ended March 31, 2015, Blue Water had accumulated $3,502 in costs related to the Stream Flow shares, recorded to additional paid in capital.  At March 31, 2015 and December 31, 2014, Blue Water recorded the investment at fair value relating to its stock holdings based on expected market listing. Accordingly, Blue Water carried the Stream Flow shares at $200,000 valuation on the balance sheet as of March 31, 2015 and December 31, 2014.

Next Level Hockey, LLC

On September 5, 2014, and under this Strategic Alliance Agreement, Blue Water entered into a definitive agreement with Next Level Hockey, LLC (“Next Level”), a New Jersey limited liability company.  The following is a summary of the terms of this transaction:

·

The Next Level transaction will essentially mirror Blue Water’s December 2013 investment in Stream Flow Media, Inc.

·

Blue Water will own a net 15% equity interest in Next Level when it goes public on the OTCBB

As of March 31, 2015 Next Level’s management was still in the process of compiling the documentation necessary for preparing their initial SEC Registration Statement on Form S-1.

Planned 2015 Capital Expenditures

Based on generating a minimum of $1.5 million in new financing during the fiscal year ending December 31, 2015, we anticipate allocating the capital as follows:

Planned Capital Expenditure			Amount ($)
Aruba Restaurant Development and Construction			$650,000
Expand rum inventories and marketing efforts to include third premium rum and two sizes of bottles (1 liter and 750ml)			500,000
SEC Filing and Compliance			125,000
Legal and Consulting			75,000
Engineering and Architectural Consulting			50,000
Location Scouting and Surveying			15,000
General Operations and Working Capital			85,000
	Total		$1,500,000

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Proposed 2015 Milestones

Second Quarter Ending June 30, 2015

o

Expand rum distribution to St. Barth’s, French West Indies and Anguilla, British West Indies

o

Begin scouting for a suitable Blue Water Bar & Grill™ location in Aruba, Dutch West Indies

o

Expand brand awareness of the line of premium rums

o

Obtain FINRA approval for Stream Flow’s OTCBB listing and commence trading

o

Initiate production of 750-ml bottles of Blue Water’s premium rums designed and approved for the US market

Third Quarter Ending September 30, 2015

o

Open the flagship Blue Water Bar & Grill™ in St. Maarten, D.W.I.

o

Market and promote the St. Maarten Blue Water Bar & Grill™ brand

 

o

Finalize the Blue Water Bar & Grill™ restaurant location in Aruba, Dutch West Indies

o

Obtain FINRA approval for one-time stock dividend of 5,000,000 shares of Stream Flow’s common stock to Blue Water’s shareholders

Fourth Quarter Ending December 31, 2015

o

Launch third premium rum (an extra old Añejo)

o

Finalize architectural and engineering plans for Aruba Blue Water Bar & Grill™

o

Execute a Distribution Agreement to export and distribute Blue Water’s premium rums in the United States

o

Commence construction of the Blue Water Bar & Grill™ restaurant in Aruba, Dutch West Indies

o

Complete production and bottling of 750-ml bottles of Blue Water’s premium rums designed and approved for the US market

Long-Term Plan (5 Years)

Blue Water Bar & Grill™

Over the next five years we plan to focus on a disciplined growth strategy of opening one new Blue Water Bar & Grill™ restaurant each year.  Aside from the Blue Water Bar & Grill™ currently under development in St. Maarten, Dutch West Indies, we have also identified the following Caribbean islands we intend to eventually open a Blue Water Bar & Grill™ restaurant:

·

Aruba, Dutch West Indies;

·

Nassau, Bahamas;

·

Cozumel, Mexico;

·

Grand Cayman; and

·

Barbados.

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We estimate that we will need to raise an aggregate of between $4 - $5 million to open the proposed restaurants on each of the listed Caribbean islands.  This capital will most likely be raised through the sales of additional equity securities, which will have a dilutive effect on existing shareholders.

Distilled Spirits

The Blue Water Ultra Premium Rum™ and Blue Water Caribbean Gold™ Premium Rum brands are currently available in St. Maarten, Dutch West Indies and Anguilla, British West Indies.  Blue Water intends to expand these brands during 2015 through distribution agreements into the neighboring islands, including the exclusive and influential St. Barths, French West Indies.  Blue Water will continue expanding these brands throughout the Caribbean Region and, ultimately, export them into the United States in early 2016.

In addition to the Blue Water Ultra Premium Rum™ and Blue Water Caribbean Gold™ Premium Rum brands, Blue Water is presently working with its Dominican Republic based producer and bottler to expand its product line premium rums.  These rums, along with other similar products, will be introduced and made available to consumers in the future.

Sales and Marketing

Our marketing strategy is aimed at attracting new customers through both traditional and creative avenues.  We intend to focus on building a reputation among local customers (those living on the island) while directing our marketing efforts toward tourists staying on the island or visiting for the day on a cruise ship.  We intend to accomplish this through:

·

Grand opening promotions;

 

·

Traditional paid advertising (e.g. radio, television, newspaper, etc.);

·

Free media exposure (e.g. hosting charity events, food reviews, etc.); and

·

Working directly with tourism bureau representatives and transportation representatives (taxi association, bus association, day sail and charter businesses, etc.).

When opening a new Blue Water Bar & Grill™ restaurant we intend to host grand opening parties for local leaders, media personalities, hospitality employees such as resort and hotel staff, and tourism bureau representatives (inclusive of cruise ship industry representatives and hotel/resort industry representatives).  Our goal with courting these groups is to introduce them to our concept and court them to refer new customers to our restaurants and provide us with free future media exposure.

Afterwards we will sustain awareness through more traditional marketing methods, including radio and television spots, newspaper ads, billboards and road signs, and resort and hotel concierge promotional cards and discount coupons.

If our strategy is successful it will lead to “word of mouth” referrals, which is our ultimate goal.  This is accomplished by providing our customers with consistently excellent service and quality food and drinks.

While we do not have a fixed marketing budget, we do anticipate launching each new restaurant with a marketing blitz campaign and tapering it down to less than 5% of the restaurant’s annual gross sales once it is sufficiently established with regular and recurring revenue.

 

Financing

We estimate that we will need to generate at least $1.5 million in additional financing in order to meet our planned 2015 capital expenditures.  Further, in order to proceed with our long-term plans, we anticipate that we will need to generate at least between $4 and $5 million in additional long-term financing.  

Madison Park Advisors Engagement

On July 21, 2014, Blue Water entered into an engagement with Madison Park Advisors, LLC, a New York investment advisory firm that also manages the Madison Park Investment Fund, to provide the completion capital for the St. Maarten, Dutch West Indies Blue Water Bar & Grill™ currently under development.

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As of March 31, 2015 no funds had been raised from the engagement with Madison Park Advisors.  A registered offering through an effective Registration Statement on Form S-1 had been approved by the SEC.  However, due to a low fixed offering price in relation to a sharp increase in Blue Water’s common stock as quoted on the OTC Bulletin Board during the three months ended March 31, 2015, Blue Water decided to cancel the registered offering that would require Blue Water to sell free-trading shares of its common stock at a substantial discount to market prices.

Blue Water continues to work with Madison Park advisors to secure new sources of financing on reasonable terms.

Additional Sources of Long-Term Financing

Currently we are exploring various sources of additional long-term financing.  However, it is important to note that other than our engagement with Madison Park Advisors we presently do not have any material arrangements for this additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Future equity financing, if ever available, could result in additional and potentially substantial dilution to existing shareholders.

Government Regulation

The restaurant industry is subject to many various laws which directly affect our organization and planned operations.  Each restaurant we open must comply with various licensing requirements and regulations by a number of governmental authorities, which typically include health, safety and fire authorities in the municipality where our restaurant is located.  The development and operation of a successful restaurant depends upon selecting and acquiring a suitable location, which is normally subject to zoning, land use, environmental, traffic, and other regulations.  Further, our operations will also be subject to various laws governing such matters as wages, health insurance requirements, working conditions, citizenship and work permit requirements, and mandatory overtime pay, all of which will directly affect our labor costs.

Additionally, because we anticipate a significant portion of our revenue to be generated from the sale of alcoholic beverages, we must comply with any and all regulations governing their sale.  Typically this requires the proper licensing at each restaurant location (in many cases it needs to be renewed on an annual basis).  Such licenses may be revoked or suspended for cause at any time.  These regulations often relate to many aspects of the restaurant, including the minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling, and storage and dispensing of alcoholic beverages.   The failure of any of our future restaurants to obtain and retain such a license would limit its ability to generate sufficient revenues to achieve profitability at that particular location, which could subsequently impact our business’s overall revenues and ability to achieve (and if achieved, maintain) profitability.

Compliance with Environmental Laws

We have not incurred and do not anticipate incurring any expenses associated with environmental laws.

Research and Development Expenditures

We have not incurred any research or development expenditures since our inception on March 3, 2011.

Patents and Trademarks

We are presently using the following trademarks and service marks:

·

“Blue Water Bar & Grill”;

·

“Blue Water Ultra Premium Rum”;

·

“Blue Water Caribbean Gold”;

·

“Perfectly Caribbean”; and

·

“Authentic. Pure. Caribbean.”

Property and Equipment

Our principal executive offices are located at 202 Osmanthus Way, Canton, GA  30114.  This office space is being provided to us by our Vice President, Michael Hume, free of charge.

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We do not hold ownership or leasehold interest in any property or equipment.

Executive Offices and Telephone Number

Our executive office and main telephone number is currently:

202 Osmanthus Way

Canton, GA  30114

Tel: (949) 264-1475

Fax: (949) 607-4052

www.bluewaterglobalgroup.com

This space is provided to us free of charge by Michael Hume, our Vice President.  If Mr. Hume decides to no longer allow us access to this office space in the future it would force us to seek outside office space elsewhere, potentially at a very high cost.

Results of Operations

Three Months Ended March 31, 2015 and 2014

Revenues.  We generated $4,464 in revenue during the three months ended March 31, 2015 compared to $-0- for the three months ended March 31, 2014.  This increase in revenue was the result of commencing sales of our initial line of premium rums comprised of the Blue Water Ultra Premium Rum™ and Blue Water Caribbean Gold™ Premium Rum in St. Maarten in February 2015.  We anticipate revenues to continue increasing progressively throughout the remainder of the fiscal year ending December 31, 2015 as a result of the launching of these premium rums and the anticipated opening of our first Blue Water Bar & Grill™ restaurant in St. Maarten, Dutch West Indies which is presently under construction.

Gross Profit.  We generated a gross profit of $2,735 during the three months ended March 31, 2015 compared to a gross profit of $-0- for the same period a year ago.  As a percentage of revenues, gross profit was 61.3% during the three months ended March 31, 2015.

 

Operating Expenses.  Our total operating expenses for the three months ended March 31, 2015 were $859,880, which is a $640,835, or 293.9%, increase compared to operating expenses of $218,045 for the same period a year ago.  Our increase in operating expenses was primarily attributable to $701,943 in one-time non-cash stock issuance expenses comprised of $428,610 for long-term management incentives and $273,333 to outside consultants.

Other Income (Expenses).  During the three months ended March 31, 2015 we incurred ($1,685,021) in other (expenses) compared to ($35,252) for the same period a year ago, which represented a $1,649,769, or 46,799.3%, increase in other (expenses).  These other (expenses) were comprised of interest expenses and non-cash derivative accounting expenses relating to convertible promissory notes.

Net Income (Loss).  We had a net loss of ($2,542,167) for the three months ended March 31, 2015 compared to a net loss of ($253,297) for the same period a year ago, which represented a $2,288,870, or 903.6%, increase in net loss.  The increase in net loss was primarily attributable to $701,943 in one-time non-cash stock issuance expenses and $1,264,246 in non-cash derivative accounting expenses relating to convertible promissory notes.

Liquidity and Capital Resources

As of March 31, 2015, we had total assets of $469,633, which consisted of $115,218 in cash, $3,532 in accounts receivable, $103,159 in inventory, property and equipment valued at $45,324, available for sale securities valued at $200,000 (comprised 20,000,000 shares of Stream Flow Media, Inc. and a net 15% interest in Next Level Hockey, LLC, valued at $200,000 and $-0-, respectively), and security deposits of $2,400.

As of March 31, 2015, our total liabilities were $3,201,064, which consisted of $1,641 in accounts payable, $512,590 in accounts payable to a related party, Taurus Financial Partners, LLC (“Taurus”), $240,687 in convertible promissory notes (net of unamortized debt discounts of $650,063), $16,608 in accrued interest, and $2,429,538 in derivative liabilities. (It is important to note that as of May 14, 2015, Taurus owned 16,000,000 shares of Blue Water’s issued and outstanding common stock and 150,000 shares of Blue Water’s issued and outstanding preferred stock, which represented 13.2% and 100% of

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each class of securities, respectively.  It is also important to note that our President and Chief Executive Officer, J. Scott Sitra, is concurrently the President and Chief Executive Officer at Taurus and has voting disposition over the controlling block of Taurus.)

Total Stockholders’ Deficit.  Our stockholders’ deficit was ($2,731,431) as of March 31, 2015.

We expect to incur continued losses through the fiscal year ending December 31, 2015, possibly even longer.  We estimate that we will need to generate at least $1.5 million in additional financing in order to meet our planned 2015 capital expenditures.  Further, in order to proceed with our long-term plans, we anticipate that we will need to generate at least between $4 and $5 million in additional long-term financing.  Madison Park Advisors has agreed to assist us with this financing, but until it is received we cannot guarantee or compel Madison Park Advisors to provide this financing in an expedient manner.

Convertible Notes

As of March 31, 2015 we had the following convertible notes payable:

		March 31, 2015				December 31, 2014
Convertible promissory notes, due May 28, 2015, net of unamortized debt discount of $28,524		$	-			$	24,476
Convertible promissory note, due  July 3, 2015, net of unamortized debt discount of $25,440			-				17,560
Convertible promissory note, due August 17, 2015, net of unamortized debt discount of $31,423 and $51,768, respectively			33,577				13,232
Convertible promissory note, due  August 19, 2015, net of unamortized debt discount of $29,052 and $47,596, respectively			27,198				8,654
Convertible promissory note, due May 19, 2015, net of unamortized debt discount of $76,796			-				23,204
Convertible promissory note, due  December 22, 2015, net of unamortized debt discount of $36,438 and $48,767, respectively			13,562				1,233
Convertible promissory note, due  December 22, 2015, net of unamortized debt discount of $72,877 and $97,534, respectively			27,123				2,466
Convertible promissory note, due November 14, 2015, net of unamortized debt discount of $23,086 and  $31,457, respectively			10,414				2,043
Convertible promissory note, due  December 1, 2015, net of unamortized debt discount of $32,493 and $44,430, respectively			17,507				5,570
Convertible promissory note, due November 13, 2015, net of unamortized debt discount of $34,206 and $47,767, respectively			20,794				7,233
Convertible promissory note, due December 22, 2015, net of unamortized debt discount of $20,406 and $27,310, respectively			7,594				690
Convertible promissory note, due July 27, 2015, net of unamortized debt discount of $65,193			34,807				-
Convertible promissory note, due January 26, 2016, net of unamortized debt discount of $41,233			8,767				-
Convertible promissory note, due November 17, 2016, net of unamortized debt discount of 66,846			12,154				-
Convertible promissory note, due February 20, 2016, net of unamortized debt discount of $103,605			12,395				-
Convertible promissory note, due February 9, 2016, net of unamortized debt discount of $93,205			14,795
Total			240,687				106,361
Less current portion			(240,687	)			(106,361)
Long term portion		$	–			$	-

More detailed information about each of the above convertible notes can be found in the notes to the financial statements in this Quarterly Report and in the notes to the financial statements in our Annual Report filed with the SEC on April 13, 2015.

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Additional Need and Sources of Financing

Currently we are exploring various sources of additional long-term financing.  However, it is important to note that other than our engagement with Madison Park Advisors we presently do not have any material arrangements for this additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Future equity financing, if ever available, could result in additional and potentially substantial dilution to existing shareholders.

Going Concern Consideration

Our independent registered public accounting firm has issued a going concern opinion in their audit report dated April 13, 2015, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 13, 2015.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.

Off-Balance Sheet Transactions

We do not engage in off-balance sheet transactions.

Contractual Obligations

The following table summarizes Blue Water’s contractual obligations as of March 31, 2015:

(1)

On January 1, 2015, Blue Water entered into a two-year lease agreement for a warehouse in St. Maarten, Dutch West Indies.  Rent is fixed at $1,200 per month throughout the term of the lease.  The first month’s rent was pro-rated at $1,045.

CRITICAL ACCOUNTING POLICIES

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X.  They reflect all adjustments which are, in the opinion of Blue Water’s management, necessary for a fair presentation of the financial position and operating results as of and for the three months ended March 31, 2015 and 2014.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, Blue Water considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of March 31, 2015 and December 31, 2014, Blue Water had no cash equivalents.

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Revenue Recognition

Blue Water follows the guidance of FASB ASC Topic 605 for revenue recognition.  In general, Blue Water recognizes revenue when (1) the price is fixed and determinable, (2) persuasive evidence of an arrangement exists, (3) the service has been provided, and (4) collectability is reasonably assured.

Blue Water anticipates generating future revenue from two sources: (i) food, beverage and souvenir sales from its Blue Water Bar & Grill™ restaurant concept presently under development and (ii) sales of its of distilled spirits, which includes its Blue Water Ultra Premium Rum™ and Blue Water Caribbean Gold™ Premium Rum brands.  Revenue from all sources will be recognized at the time of the sale.

Inventory/cost of sales

Blue Water maintains an inventory, which consists primarily of distilled spirits, manufactured and packaged by outside vendors, including component parts such as packaging and delivery to Blue Water’s warehouse.  The average cost method is utilized in valuing the inventory, and is stated at the lower of cost or market.  

As of March 31, 2015, Blue Water’s inventory, comprised of distilled spirits, available for sale of $103,159.  During the three months ended March 31, 2015, the cost of delivered products sold in the current period was $1,729.

Long-Term Investments

Blue Water accounts for its long-term investments, which are designated as available-for-sale securities, in accordance with US GAAP for certain investments in debt and equity securities, which requires that available-for-sale securities be carried at fair value with unrealized gains and losses, net of tax, included in stockholders' equity under accumulated other comprehensive income (loss).  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  As of March 31, 2015 and December 31, 2014, Blue Water had long-term investments consisting of (i) 20,000,000 shares of Stream Flow Media, Inc. and (ii) a net 15% interest in Next Level Hockey, LLC. During the three months ended March 31, 2015, Blue Water recorded associated costs of the investment of $3,502 as a charge to additional paid in capital.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:

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The estimated fair values of the Company’s financial instruments are as follows:

Net Loss per Share Calculation

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss

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per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  Blue Water excludes all potentially dilutive securities from its diluted net loss per share computation since their effect would be anti-dilutive because Blue Water recorded a loss for the three months ended March 31, 2015 and 2014.

Beneficial Conversion Feature

From time to time, Blue Water may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features.  A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt.  In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital.  The debt discount is amortized to interest expense over the life of the note using either the straight line method or the effective interest method.

Income Taxes

We account for income taxes pursuant to FASB ASC 740, Income Taxes.  Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

We maintain a valuation allowance with respect to deferred tax assets.  Blue Water establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration Blue Water’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as Blue Water generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

Accounting for Derivative Instruments

All derivatives have been recorded on the balance sheet at fair value based on the Black Sholes calculation.  These derivatives, including embedded derivatives in Blue Water's convertible notes which have floating conversion prices based on changes to the quoted price of Blue Water's common stock and common stock equivalents tainted as a result of the derivative, are separately valued and accounted for on Blue Water's balance sheet.  Fair values for exchange traded securities and derivatives are based on quoted market prices.  Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.

Election to Use Extended Transitional Period Under Jumpstart Our Business Startups Act (“JOBS Act”)

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the  adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.  As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on Blue Water's financial position, results of operations or cash flows.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable since we are a smaller reporting company.

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Item 4.  Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of principal executive officer and sole director, J. Scott Sitra, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act).

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be presented or detected on a timely basis.

Based on management’s assessment, we have concluded that, as of March 31, 2015, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our annual and interim filings with the SEC.

Management has concluded that our disclosure controls and procedures had the following material weaknesses:

·

We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.  While this control deficiency has not resulted in any audit adjustments to our interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties;

 

·

Blue Water lacks sufficient resources to perform the internal audit function and does not have an Audit Committee;

·

We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert to Blue Water.  The Board of Directors is comprised of one (1) member who also serves as Blue Water’s principal executive officer.  As a result, there is a lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by Blue Water; and

·

Documentation of all proper accounting procedures is not yet complete.

These weaknesses have existed since our inception on March 3, 2011 and, as of March 31, 2015, have not been remedied.

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:

·

Considering the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures;

 

·

Hiring additional qualified financial personnel, including a Chief Financial Officer, on a full-time basis;

·

Expanding our current board of directors to include additional independent individuals willing to perform directorial functions; and

·

Increasing our workforce in preparation of opening our first Blue Water Bar & Grill™ in St. Maarten, Dutch West Indies and initiating wholesale and retail sales of our distilled spirits.

Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near-term due to our limited financial resources.  Until such remedial actions can be realized, we will continue to rely on the limited advice of outside professionals and consultants.

Changes in Controls and Procedures

There have been no changes in 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.

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PART II

Item 1.  Legal Proceedings

No officer, director, or persons nominated for these positions, and no promoter or significant employee of our corporation has been involved in legal proceedings that would be material to an evaluation of our management.  We are not aware of any pending or threatened legal proceedings involving Blue Water Global Group, Inc.

 

During the past ten (10) years, J. Scott Sitra and Michael Hume have not been the subject of the following events:

 

1)

Any bankruptcy petition filed by or against any business of which either Mr. Sitra or Mr. Hume were a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time;

2)

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding;

3)

An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting Mr. Sitra’s or Mr. Hume’s involvement in any type of business, securities or banking activities; and

4)

Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Item 1A.  Risk Factors

Not applicable since we are a smaller reporting company.

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

None.

Item 3.  Default Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not Applicable.

Item 5.  Other Information

None.

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Item 6.  Exhibits

(1)

Incorporated by reference to our Registration Statement on Form S-1 filed May 27, 2011.

(2)

Incorporated by reference to our Current Report on Form 8-K filed July 11, 2013.

(3)

Incorporated by reference to current report on Form 8-K filed on September 23, 2013.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereto duly authorized on this 15th day of May, 2014.

BLUE WATER GLOBAL GROUP, INC.

By:

/s/ J. Scott Sitra                                                            

J. Scott Sitra

President, Chief Executive Officer,

Secretary, Treasurer, Chief Financial Officer,

Principal Executive Officer,

Principal Financial Officer,

Principal Accounting Officer, and Sole Director

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