UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the Quarterly Period Ended March 31, 2017

Commission File Number: 333-205604

 

Global Boatworks Holdings, Inc.

(Exact name of registrant as specified in its charter)

Florida		81-0750562
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

2637 Atlantic Blvd. #134
Pompano Beach, FL 33062

(Address of principal executive offices)    (Zip Code)

954-934-9400

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒  No  ☐

 

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

(Do not check if a smaller reporting company)

 

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

As of May 5, 2017 we had 23,886,407 shares of common stock outstanding.

1

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PART I—FINANCIAL INFORMATION

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets

F-2

Consolidated Statements of Operations (unaudited)

F-3

Consolidated Statement of Changes in Stockholders’ Deficit (unaudited)

F-4

Consolidated Statements of Cash Flows (unaudited)

F-5

Notes to Consolidated Financial Statements (unaudited)

F-6

F-1

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Global Boatworks Holdings, Inc.

Consolidated Balance Sheets

	March 31, 2017		December 31, 2016
ASSETS	(Unaudited)
CURRENT ASSETS
Cash	$38,086		$10,511
Construction in progress	571,404		431,501
Short term loan to stockholder/related party	50,000		50,000
Prepaid officer compensation	336,992		481,417
Prepaid expenses	55,231		47,593
Total current assets	1,051,713		1,021,022
PROPERTY AND EQUIPMENT
Architectural plans, net of $1,824 and $1,368 amortization	10,942		11,398
Net property and equipment	10,942		11,398
Total Assets	$1,062,655		$1,032,420
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$203,529		$127,776
Deferred revenue	11,141		-
Short term loan - related party	-		200
Short-term loans, net of discount of $25,970 and $0	354,030		100,000
Short term convertible loan, net of discounts	581,439		429,906
Fair value of derivative liability	510,802		780,685
Due to related party predecessor	3,888		3,888
Total current liabilities	1,664,829		1,442,455
LONG TERM LIABILITIES
Note payable and accrued interest for the vessel - related party	104,975		104,482
Total long term liabilities	104,975		104,482
Total Liabilities	1,769,804		1,546,937
Commitments and contingencies (see Note 8)
Redeemable preferred stock Series A, 1,000,000 shares designated, 1,000,000 shares issued and outstanding at March 31, 2017 and December 31, 2016 ($1,000 redemption value)	1,000		1,000
STOCKHOLDERS’ DEFICIT
Preferred stock, par $0.0001; 10,000,000 shares authorized; 9,000,000         available for issuance	-		-
Common stock, par $0.0001; 90,000,000 shares authorized; 23,811,407 and       21,333,629 issued and outstanding at March 31, 2017 and December 31,       2016, respectively	2,381		2,133
Additional paid-in capital	1,278,597		1,087,261
Accumulated deficit	(1,989,127)		(1,604,911)
Total stockholders’ deficit	(708,149)		(515,517)
Total Liabilities and  Stockholders’ Deficit	$1,062,655		$1,032,420

The accompanying unaudited notes are an integral part of the unaudited consolidated financial statements

F-2

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Global Boatworks Holdings, Inc.

Consolidated Statements of Operations

Three Months Ended March 31,

(unaudited)

The accompanying unaudited notes are an integral part of the unaudited consolidated financial statements

F-3

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Global Boatworks Holdings, Inc.

Consolidated Statement of Changes in Stockholders’ Deficit

(unaudited)

The accompanying unaudited notes are an integral part of the unaudited consolidated financial statements

F-4

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Global Boatworks Holdings, Inc.

Consolidated Statements of Cash Flows

Three Months Ended March 31,

(unaudited)

The accompanying unaudited notes are an integral part of the unaudited consolidated financial statements

F-5

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(1) NATURE OF OPERATIONS

Global Boatworks Holdings, Inc., (“the Company,” “Successor” or “Global”), was formed on May 11, 2015, under the laws of the State of Florida to reorganize Global Boatworks, LLC. At formation the Company acquired 100% of the membership interests of Global Boatworks, LLC, (“LLC”) which was formed on June 16, 2014, under the laws of the State of Florida.  The Company’s business activities to date have primarily consisted of the formation of a business plan for building luxury floating vessels on a barge bottom; the rental activities relating to the existing vessel, Miss Leah and the construction of the first new vessel, Luxuria I. On September 25, 2014, effective the close of business September 24, 2014, the Company acquired a luxury floating vessel from Financial Innovators Corp., (“Predecessor” or “Financial Innovators”), and operates it as a rental property, based in Boston harbor.

The accompanying consolidated financial statements include the activities of Global Boatworks Holdings, Inc. and Global Boatworks, LLC, its wholly owned subsidiary.

(2) BASIS OF PRESENTATION, USE OF ESTIMATES AND GOING CONCERN

a) Basis of Presentation and Principles of Consolidation

The comparative figures shown throughout these unaudited consolidated financial statements are the historical results of Global Boatworks Holdings, Inc. inclusive of its wholly owned subsidiary Global Boatworks, LLC. The Company has retroactively restated amounts within certain components of Shareholders' Deficit on the accompanying unaudited consolidated financial statements and footnotes to account for the acquisition and reorganization of Global Boatworks, LLC. All intercompany balances and transactions have been eliminated.

The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America ("U.S.") as promulgated by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") and with the rules and regulations of the U.S Securities and Exchange Commission ("SEC"). The consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results for the periods shown. The results of operations for the periods presented are not necessarily indicative of the results expected for any future period. The information included in the March 31, 2017 consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis and Results of Operations contained elsewhere in this report and the audited consolidated financial statements and accompanying notes for the year ended December 31, 2016 filed in Form 10-K filed on March 30, 2017 with the U.S. Securities and Exchange Commission.

b) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying unaudited consolidated financial statements involved the valuation of construction in progress, depreciable life of the luxury floating vessel and other property and equipment, valuation of long lived assets, valuation of derivatives, the valuation of common and preferred stock issued as compensation, and valuation allowance of deferred income tax assets.

F-6

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(2) BASIS OF PRESENTATION, USE OF ESTIMATES AND GOING CONCERN, continued

c) Going Concern

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  The Company’s financial position and operating results raise substantial doubt about the Company’s ability to continue as a going concern, as reflected by the accumulated deficit, stockholder’s deficit and working capital deficit of $1,989,127; $708,149 and $613,116 at March 31, 2017. The Company had a net loss of $384,215 and used cash of $222,425 in operating activities in the three months ended March 31, 2017. The Company is expected to have increasing costs and expenses as a result of becoming a publicly held company and constructing new vessels without immediate increases in revenues as they continue to implement their plan of operations. The ability of the Company to continue as a going concern is dependent upon increasing operations, developing sales and obtaining additional capital and financing. The Company is seeking to raise sufficient equity capital to enable it to pay off existing debt. It is also attempting to sell the Miss Leah and the first luxury floating vessel it currently owns.  The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Cash and cash equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. The Company had no financial instruments that qualified as cash equivalents at March 31, 2017 or December 31, 2016.

b) Construction in progress

Costs to construct vessels are capitalized during the construction phase. Upon completion of a vessel the Company will either sell the vessel or place in it service as a rental property. If the vessel is to be leased the construction costs are transferred to property and equipment and depreciated over its useful life.

     

c) Property and equipment

All property and equipment are recorded at cost and depreciated over their estimated useful lives, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.

d) Impairment of long-lived assets

A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.

F-7

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

e) Financial instruments and Fair value measurements

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

ASC 825 also requires disclosures of the fair value of financial instruments. The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts payable and accrued liabilities approximates their fair values because of the short-term maturities of these instruments.

FASB ASC 820 “Fair Value Measurement” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following is the Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis at March 31, 2017 and December 31, 2016, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):

	March 31, 2017 (unaudited)			December 31, 2016
Level 3 – Embedded Derivative Liability	$	510,802		$	780,685

Changes in Level 3 assets measured at fair value for the quarter ended March 31, 2017 were as follows:

Balance, December 31, 2016	$	780,685
Initial valuation		22,876
Amortization upon conversion		(46,463)
Change in fair value		(246,296)
Balance, March 31, 2017 (unaudited)	$	510,802

f) Revenue recognition

Rental Revenue Revenue is recognized when earned, generally starting when the rental customer takes temporary possession of the floating vessel and through their contracted stay. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the marina dockage fees and fees charged by the web site Homeaway, where the floating vessel is advertised for rent.

F-8

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

f) Revenue recognition (continued)

Sale Revenue  Revenue is recognized when earned, generally at closing of the sale of a vessel. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the capitalized cost of constructing a vessel.

g) Stock compensation for services rendered

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the shorter of period the employee or director is required to perform the services in exchange for the award or the vesting period. The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Pursuant to ASC 505-50, for share-based payments to non-employees, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

h) Income Taxes

The LLC was a pass through entity for income tax purposes, therefore there is no income tax provision or liability for this entity through the Company’s incorporation date of May 11, 2015. As a result of the reorganization the Company became a taxable entity on May 11, 2015. Upon becoming a taxable entity, the Company began to use the asset and liability method of ASC 740 to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

As of March 31, 2017 tax years 2014, 2015 and 2016 for the LLC and 2015 and 2016 for the corporation remain open for IRS audit. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.

F-9

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

i) Convertible Notes With Fixed Rate Conversion Features

The Company may issue convertible notes, which are convertible into common shares at a fixed discount to the price of the common stock at the time of conversion. The Company measures the fair value of the note at the time of issuance at the fixed monetary value of the payable and records any premium as interest expense on the issuance date.

j) Debt issue costs

The Company accounts for debt issuance cost paid to lenders, or third parties. The costs associated with the issuance of debt are recorded as debt discount and amortized over the life of the underlying debt instrument.

k) Derivatives

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a convertible note containing an embedded derivative instrument, the instrument is marked to fair value at the conversion date and the debt and derivative are removed from the balance sheet, the shares issued upon conversion of the note are recorded at their fair value and a gain or loss on extinguishment is recognized, as applicable.

Equity instruments that are initially classified as equity, that become subject to reclassification under this accounting standard, are reclassified to liability at the fair value of the instrument on the reclassification date.

l) Net income (loss) per share

Basic loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period.  Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless consideration of such dilutive potential shares would result in anti-dilution. There were 22,258,185 and 16,511,370 common stock equivalents at March 31, 2017 and December 31, 2016, respectively.

m) Recent accounting pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time based on when control of goods and services transfer to a customer. As a result, we do not expect significant changes in the presentation of our financial statements. This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and entities are permitted to apply either prospectively or retrospectively; early adoption is permitted.

F-10

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

m) Recent accounting pronouncements (continued)

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. This ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and entities are permitted to apply either prospectively or retrospectively; early adoption is permitted. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on the Company’s financial position, results of operations and cash flows.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. The new standard principally affects accounting standards for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. Upon the effective date of the new standards, all equity investments in unconsolidated entities, other than those accounted for using the equity method of accounting, will generally be measured at fair value through earnings. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income for equity securities with readily determinable fair values. The new guidance on the classification and measurement will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and early adoption is permitted. The Company is in the process of evaluating the impact of the adoption of ASU 2016-01 on the Company’s financial position, results of operations and cash flows.

In February 2016, the FASB issued ASU 2016-02, “Leases” which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects that the adoption of ASU 2016-02 will have on the Company’s consolidated financial statements.

(4) CONSTRUCTION IN PROGRESS

Construction in progress represents the capitalized construction of its Luxuria floating vessel(s) being constructed for sale or to be placed in rental service. At March 31, 2017 and December 31, 2016, the Company has capitalized the $571,404 and $431,501 expended in the construction of its first Luxuria floating vessel.

F-11

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(5) PROPERTY AND EQUIPMENT

Property and Equipment consists of the following at March 31, 2017 (unaudited) and December 31, 2016:

	March 31, 2017		December 31, 2016
Miss Leah floating vessel	$ -		$ -
Architectural plans	$ 12,766		$ 12,766
Less: accumulated depreciation and amortization	$ (1,824)		$ (1,368)
Total PP&E	$ 10,942		$ 11,398

On September 25, 2014, the Company acquired the Miss Leah, a two story luxury floating vessel in the Cape Cod architectural style built on a barge platform. The Miss Leah is based at a marina in Boston harbor. It is rented out primarily through a third party rental management company on a short term vacation type basis. The Miss Leah was built in 2004 by the founder of the Company and subsequently sold in 2006 to his brother who established the Predecessor’s rental business.  Due to the related party relationship between the Company and the Predecessor the luxury floating vessel was recorded on the Company’s books at its original cost basis of $0 based on its fully depreciated value at the transfer date. As the Miss Leah has been recorded on the books of the Company at a value of $0, there is no depreciation recorded.

The Company capitalized the costs of developing the architectural plans for the Luxuria model floating vessel and has begun amortizing the costs over their estimated useful life of seven years, beginning April 1, 2016. Amortization expense for the three months ended March 31, 2017, was $456.

(6) RENTAL PROPERTY AND RELATED NOTE  PAYABLE

On September 25, 2014, the Company acquired the Miss Leah, a two story luxury floating vessel in the Cape Cod architectural style built on a barge platform. The Miss Leah is based at a marina in Boston harbor. It is rented out primarily through a third party rental management company on a short term vacation type basis. The Miss Leah was built in 2004 by the founder of the Company and subsequently sold in 2006 to his brother who established the Predecessor’s rental business.

The terms of this acquisition are for a payable to the related party Predecessor in the amount of $100,000, carrying interest at 2% per annum from the effective date of the transfer date of September 25, 2014 with all principal and interest due on the maturity date of June 20, 2022, which was memorialized in the form of a promissory note in June 2015, effective September 25, 2014. Due to the related party relationship between the Company and the Predecessor the luxury floating vessel was recorded on the Company’s books at its original cost basis of $0 based on its fully depreciated value at the transfer date. Accordingly, the Company charged additional paid-in capital as a distribution for $100,000. Outstanding principal and interest totaled $104,975 at March 31, 2017.

F-12

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(7) SHORT TERM LOAN AND SHORT TERM CONVERTIBLE NOTE

a) Short term notes

NOTE 1: On July 9, 2015, the company entered into a loan agreement in the amount of $151,700 with a shareholder. The company issued 250,000 common shares to the shareholder as consideration for providing us the loan. The shares were valued at $25,000, or $0.10 per share (based on the recent private placement sales) was recorded as a discount and is being amortized at a rate of $2,083 per month over the life of the loan. The note bears interest at the rate of 10%. Prepaid interest in the amount of $15,000 and a loan fee of $1,700 were deducted from the proceeds of the loan. These were amortized each month at the rate of $1,250 and $142 over the life of the loan, respectively. We were obligated to pay the principal and interest due on July 9, 2016. The loan was secured by the Miss Leah, our company owned vessel. The Company paid $4,200 in interest to the holder during the first quarter 2017 (unaudited).

The note holder sold $51,700 of this note to a third party in August 2016, and the Company modified the new $51,700 note to add a conversion feature at a conversion rate of 60% of the trading price of the Company’s common stock. This note is considered stock settled debt and accordingly, the Company  recorded a premium on the debt of $34,467 as a charge to interest expense on the modification date. This third party converted $51,700 of this in exchange for 1,574,740 shares in August and the fourth quarter 2016, and the premium was reclassified to additional paid in capital.

The $100,000 remaining balance of the original note was renegotiated into a new note on December 5, 2016 which matures on July 15, 2017. This new note carries interest at a rate of 16.8% which is payable in cash monthly. The Company paid $4,200 in interest during the first quarter 2017. This new note required the Company to issue 100,000 shares that were valued at $6,000 and were recorded as a discount to be amortized over the remaining life of the note and were issued in 2017. The note balance and unamortized discount balance at March 31, 2017, is $100,000 and $3,245.

NOTE 2: On January 5, 2017, pursuant to a securities purchase agreement and a secured promissory note for $830,000 available in five tranches, the Company drew $170,000 and received $150,000 in cash net of $15,000 OID and $5,000 legal fees under this nine month secured promissory note. This note is secured by all the assets of the Company, inclusive of the Luxuria I and the Luxuria II, the member interests of its wholly owned LLC and personally guaranteed by Robert Rowe, CEO of the Company. The lender’s security interests are subordinate by law to the security interests of the August 11, 2016 lender.  This note is structured in multiple parts, first the initial $170,000 as drawn and a subsequent $660,000 which can be drawn at the Company’s option. This note does not carry a stated interest rate, (except it is 22% in event of default as defined in the promissory note), but carries an Original Issue Discount (OID) that totals $75,000 and is pro-rata on each tranche drawn. The OID will be amortized over the remaining life of the note from the date drawn. In addition, the Company is required to pay $5,000 of the lender’s legal fees which was applied to the first tranche drawn which will also be recorded as debt discount and will be amortized over the nine month life of the note. The Company received the second tranche of $110,000 and received $100,000 in cash net of $10,000 OID under this note in March 2017.

This note requires a partial prepayment if and when the Company sells the Luxuria I and Luxuria II, upon the receipt of which the lender has agreed to release the security interest in the vessels. This prepayment is 10% of the profits on the Luxuria I and 33% of the profits on the Luxuria II. If the Company rents/leases either the Luxuria I or II, then the prepayment is 20% of the gross rental revenue.

F-13

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

b) Short term convertible note

Short term convertible debt was as follows at March 31, 2017:

Convertible note	$598,300
Less: unamortized debt discounts	(16,861)
Total convertible note, net	$581,439

On August 11, 2016, pursuant to a securities purchase agreement and a secured convertible promissory note for $610,000, the Company drew $305,000 and received $227,500 in cash under this six month secured convertible promissory note. This note is secured by all the assets of the Company, inclusive of the Miss Leah and the Luxuria 1, and the member interests of its wholly owned LLC. This note is structured in two parts, first the initial $305,000 as drawn and a subsequent $305,000 which can be drawn at the Company’s option in amount/s determined by the Company. This note does not carry a stated interest rate, but carries an Original Issue Discount (OID) that totals $100,000 and is proportional to the total amount borrowed. An OID of $50,000 was recorded as a discount to the note for the initial draw and is being amortized over the six month life of the note. In addition, the Company is required to pay $10,000 of the lender’s legal fees (pro rata to the draws) and $22,500 of brokerage commission which was withheld from the initial $305,000 draw, both of which were also recorded as debt discounts and are being amortized over the six month life of the note. Also, the Company is required to issue 100,000 shares of restricted common stock which was valued at $0.10 per share based on recent stock sales and recorded as a discount to the note and is being amortized over the six month life of the note. This note requires a $200,000 partial prepayment if and when the Company sells the Miss Leah. The note is personally guaranteed by the Company’s CEO, Robert Rowe. In event of default the note carries an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law.

On October 5, 2016, the Company drew an additional $122,000 and received $92,000 in cash under this six month secured convertible promissory note. An OID of $20,000 was recorded as a discount to the note for the second draw and is being amortized over the remaining life of the note. Brokerage commission of $8,000 and legal fees of $2,000 were paid from this draw and recorded as debt discounts and were amortized over the remaining life of the loan. On November 3, 2016, the Company drew an additional $183,000 and received $150,000 in cash under this six month secured convertible promissory note. An OID of $30,000 and $3,000 of legal costs were recorded as a discount to the note for the third draw and are being amortized over the remaining life of the note.

The total note is convertible into common stock upon an event of default as follows:

Lender has the right at any time following an Event of Default, at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below).

F-14

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(7) SHORT TERM LOAN AND SHORT TERM CONVERTIBLE NOTE, (continued)

b) Short term convertible note, (continued)

 

Subject to the adjustments set forth herein, the conversion price (the “Conversion Price”) for each Conversion shall be equal to 60% (the “Conversion Factor”) multiplied by the lowest Closing Bid Price in the twenty (20) Trading Days immediately preceding the applicable Conversion. Additionally, if at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future Conversions. Finally, in addition to the Default Effect, if any Major Default occurs after the Effective Date (other than an Event of Default for failure to pay the Conversion Eligible Outstanding Balance on the Maturity Date), the Conversion Factor shall automatically be reduced for all future Conversions by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt, each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions in Conversion Factor, even if the same Major Default occurs three (3) separate times). For example, the first time the Conversion Shares are not DTC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 60% to 55% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major Default pursuant to Section 4.1(a), then for purposes of this example the Conversion Factor would be reduced by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default.

Due to the variable conversion terms and certain default provisions, the embedded conversion option has been bifurcated and recorded as a derivative liability at an initial fair value of $378,624 with $217,500 recorded as a debt discount and $161,124 as a derivative expense. The October 5, 2016 draw resulted in an initial fair value of $113,616 with $92,000 recorded as a debt discount and $21,616 as a derivative expense.  The November 3, 2016 draw resulted in an initial fair value of $190,356 with $150,000 recorded as a debt discount and $40,356 as a derivative expense. The valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.50 to 0.10; conversion price range of $0.021 to $0.036; Bond equivalent yield rate between 0.29% to 0.63% and volatility ranging from 240% to 277%. At March 31, 2017, the valuation method utilized was the Black-Scholes model with the following assumptions: Expected life in years 0.10; conversion price range of $0.027 to $0.04; Bond equivalent yield rate 0.63% and volatility ranging from 264% to 283%.

On February 4, 2017, the maturity date was extended to May 11, 2017. Under the terms of this extension, the Company agreed to pay an additional $18,300 in interest at maturity. The Company recorded this interest as a debt discount and is amortizing it to maturity. At March 31, 2017, the unamortized balance is $8,430.

On March 22, 2017, the Company issued 1,000,000 shares of common stock to settle $30,000 of this note. These shares were valued at $0.073 per share, or $73,000, based on the quoted trading price, and after relieving the related derivative value a gain of $3,463 was recorded. (See Note 9)

F-15

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(8) COMMITMENTS AND CONTINGENCIES

a) Stockholders deficit

At March 31, 2017, the Company has the obligation to issue 1,000,000 shares of common stock on July 1, 2017 and 1,000,000 shares on January 1, 2018, under a new three year consulting agreement entered into on December 9, 2016. These shares will be valued at the market price for shares at the date they are earned.

b) Leases

The Company occupies dockage space pursuant to an agreement with SMH Marina Bay Boston Harbor dated October 1, 2016. We pay annual rents of approximately $12,000. The agreement renews on October 1st of each year. We occupy approximately four hundred (400) square feet of office space without charge at the residence of Robert Rowe our Chief Executive Officer, President, Treasurer and Director, and Leah Rowe, our Secretary. We rented land space for the Luxuria I while it was under construction at a rate of approximately $1,900 per month. This rental was not under a lease because we did not know the length of time it would take to construct the Luxuria I.

c) Material Contracts and Agreements

On November 1, 2016, the Company entered into a three year employment agreement with its CEO, Robert Rowe. This agreement calls for him to be paid $20,000 per month in cash and for the Company to issue hin 10,000,000 shares of restricted common stock. These shares were issued and valued at the market price on the grant date, $0.0577 per share, for a total of $577,700, which was recorded as prepaid officer compensation and will be amortized over the one year vesting period.

On December 9, 2016, we entered into an agreement (the Agreement) with Oceanside Equities, Inc., (Oceanside), a Florida corporation that provides consulting services. Oceanside agreed to provide us with services from December 9, 2016 until December 8, 2019, in exchange for a one time fee of $20,000 in cash; $16,000 per month accrued and payable in either cash or shares of restricted common stock at the Company’s election and three million one hundred thousand (3,100,000) shares of our restricted common stock, issued 1,100,000 on January 1, 2017, 1,000,000 issued on July 1, 2017 and 1,000,000 issued on January 1, 2018.  We will value these shares at the market price on the date they are earned which will be recognized over the term of the contract at the rate of 172,222 shares per month.

d) Investment Banking Agreement

In February 2016 the Company entered into a two year investment banking agreement to raise capital. Pursuant to this agreement the Company is obligated to pay a cash success fee between 6% and 10%, depending on the amount raised as well as issue common stock in the amount of 4% of the amount raised.

e) Common Stock Subscription Agreement

In the last quarter of 2014, as memorialized in May 2015, the Company received a stock subscription agreement from a now former officer and director of the Company for 1,500,000 shares of common stock in exchange for $250,000 in cash or cash equivalents, such as labor and materials for the construction of the barge bottom, or $0.167 per share. Through June 30, 2016 this former officer and director has paid $55,000 and received 330,000 shares, respectively. In August 2016, the Company issued 425,000 shares of our restricted common stock to this former officer and director in exchange for the construction of the barge bottom for Luxuria I, delivered in February, valued at $70,000, based on a negotiated agreement.

F-16

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

(8) COMMITMENTS AND CONTINGENCIES (continued)

f) Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of March 31, 2017, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

(9) STOCKHOLDERS’ DEFICIT

At March 31, 2017 and December 31, 2016, the Company has 90,000,000 shares of par value $0.0001 common stock authorized and 23,811,407 and 21,333,629 issued and outstanding. At March 31, 2017 and December 31, 2016, respectively, the Company has 10,000,000 shares of par value $0.0001 preferred stock authorized and 1,000,000 and 1,000,000 Redeemable Series A preferred shares issued and outstanding, respectively.

On January 1, 2017, the Company issued 927,778 shares of common stock under a consulting agreement. These shares were valued at $0.08 per share, or $62,834. On January 18, 2017, the Company issued 200,000 shares of common stock under a consulting agreement. These shares were valued at $0.08 per share, or $16,000. On January 23, 2017, the Company issued 250,000 shares of common stock under a consulting agreement. These shares were valued at $0.14 per share, or $33,750. On January 12, 2017, the Company issued 100,000 shares of common stock pursuant to the replacement $100,000 promissory note. These shares were valued at $0.06 per share, or $6,000, which was recorded as a debt discount and is being amortized over the remaining life of the loan.

On March 22, 2017, the Company issued 1,000,000 shares of common stock to settle $30,000 of the outstanding convertible debt. These shares were valued at $0.073 per share, or $73,000 based on the quoted trading price, and after relieving the related derivative value a gain of $3,463 was recorded. (See Note 7)

(10) RELATED PARTIES

a) Rental property

On September 25, 2014, the Company acquired the Miss Leah, a luxury floating vessel built on a barge platform from the Predecessor which is owned by the founders brother. As part of this acquisition transaction the Company issued a promissory note in June 2015 to the Predecessor in the amount of $100,000, carrying an interest rate of 2% effective

September 25, 2014, with a maturity date of June 20, 2022. The Company recorded the payable in September 2014 which was formalized with this promissory note in June 2015. At March 31, 2017 and December 31, 2016, the Company had accrued interest of $4,975 and $4,482, respectively. (See Note 6)

b) Related party payable

In the last quarter 2014, the Predecessor continued to receive some of the revenue from and to pay some of the expenses related to the rental of the Miss Leah. The Company has established a payable to the Predecessor for the net differential of $3,888 and recorded the related revenue and expenses in the Company’s records.

F-17

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Global Boatworks Holdings, Inc.

Notes to Consolidated Financial Statements

(Information as to the three months ended March 31, 2017 is unaudited)

c) Common stock subscription receivable

In the last quarter 2014 as memorialized in May 2015, the Company received a stock subscription agreement from a now former director of the Company for 1,500,000 shares of common stock in exchange for $250,000 in cash or cash equivalents, or $0.167 per share. In 2014 and 2015 this now former director contributed $5,000 and $50,000 and received 30,000 and 300,000 shares, respectively. In 2016 he constructed the barge bottom for the Luxuria I and received 425,000 shares valued at $70,000.

d) Expenses incurred to related parties during each period of operations presented:

	Three Months ended March 31, 2017		Three Months ended March 31, 2016
	(Unaudited)		(Unaudited)
Commissions - daughter of founder	$ 971		$ -
Construction management - brother of founder	$ 12,000		$ -
Consulting fees – significant stockholder	$ 106,583		$ -

e) Loan to significant consultant/stockholder

The Company extended a short term non-interest bearing loan of $50,000 to a significant consultant/stockholder. At March 31, 2017, this note is still outstanding and matures June 30, 2017.

(11) CONCENTRATIONS OF RISK

The Company has only one revenue producing asset at this time, the Miss Leah floating vessel, and that asset is located in Boston Harbor. The rental season at this location is generally from March through October. The Company primarily utilizes one booking agent to schedule bookings from customers and collect the revenue. If required the Company believes it could obtain bookings through an alternative provider.

The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company had no cash balances in excess of FDIC insured limits at March 31, 2017 and December 31, 2016, respectively.

(12) SUBSEQUENT EVENTS

a) Short term convertible note

On May 4, 2017, the lender agreed to again extend the maturity of the note to at least May 18, 2017. It is expected that the extension will be for a greater period of time than one week, however the terms are still under negotiation.

b) Stockholder’s deficit

On May 4, 2017 the Company issued 75,000 shares of common stock in exchange for services valued at $0.035 per share, or $2,618.

c) Leases

In mid April the Luxuria I was moved to Bahia Mar Marina at Ft. Lauderdale Beach, FL. The Company pays $4,500 per month for this slip under a one year agreement.

F-18

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

We were founded in June of 2014 to commercialize luxury stationary floating vessels. We plan to generate revenues from the sale of and rental of the vessels initially in South Florida. Our newly developed Luxuria model features a South Florida modern style, and is approximately one thousand six hundred (1,600) square feet under air. The vessel offers amenities typically found in a luxury home.

Three (3) Months Ended March 31, 2017 and 2016

We had revenues of $0 and $0 for the three (3) months ended March 31, 2017 and 2016, respectively. Our only source of revenue at this time is the rental of the Miss Leah luxury floating vessel located in Boston Harbor. The rental season for the Miss Leah runs from April through October.

Cost of revenues was $1,179 compared to $3,431 for the three (3) months ended March 31, 2017 and 2016, respectively, or a sixty five point six percent (65.6%) decrease. This decrease was primarily due to a decrease in marina fees. The Boston marina was sold twice during 2016. The latest owner charges us less in slip rent.

Gross margin was ($1,179) and ($3,431) for the three (3) months ended March 31, 2017 and 2016, respectively.

General and administrative expenses were $218,546 compared to $34,816 for the three (3) months ended March 31, 2017 and 2016, respectively, an increase of five hundred twenty seven point seven percent (527.7%). General and administrative expenses are principally composed of insurance, maintenance, officer pay and travel. The primary increases were in officer pay as a result of stock based compensation in the amount of $144,425.

Our professional fees were $214,103 compared to $23,476 for the three (3) months ended March 31, 2017 and 2016, respectively. This increase is principally the result of stock based compensation for some of our consultants in the amount of $94,166; amortization of prepaid professional fees of $16,304 and accrual of professional fees of $48,000.

Our interest expense was $195,570 compared to $11,392 for the three (3) months ended March 31, 2017 and 2016, respectively, an increase of $184,178 or sixteen hundred seventeen percent (1,617%). This increase is due to the interest expense accrued on the note payable to affiliate for the acquisition of the vessel and the amortization of various loan discounts on the short term loan received in July 2015, which was renewed in December 2016 with a new loan discount; Original Issue Discount (OID); loan discounts on the short term loan received in August 2016 and OID and loan discount on the short term loan received in January 2017.

Our initial derivative expense was $4,576 and change in fair value of derivative was $246,296 for the three months ended March 31, 2017 and zero for the three months ended March 31, 2016.

We recorded a net loss of ($384,215) compared to ($73,115) for the three (3) months ended March 31, 2017 and 2016, respectively.

Liquidity and Capital Resources

Cash Flow Activities

Our cash increased $27,575 for the three months ended March 31, 2016. This increase was primarily the result of our receipt of an additional $250,000 debt proceeds during the quarter.

As of March 31, 2017, we had cash on hand of $38,086 for our operational needs. Currently, our operating expenses are approximately $14,500 per month. We are obligated to repay an outstanding loan in one lump payment in the amount of $100,000 on July 15, 2017 and a second one in one lump payment in the amount of $598,300 on May 18, 2017. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs we would have available cash for our operating needs for approximately two (2) months before repayment of the $598,300 due on May 18, 2017 and the $100,000 due on July 15, 2017.

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Investing Activities

There were no investing activities during the three months ended March 31, 2017.

Financing Activities

During the three (3) months ended March 31, 2017 we funded our working capital requirements principally through the use of proceeds of $250,000 from additional debt.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, prepaid expenses, payables and accrued expenses. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. We consider the carrying values of our financial instruments in the consolidated financial statements to approximate fair value, due to their short-term nature.

Revenue Recognition

Rental Revenue. Revenue is recognized when earned, generally starting when the rental customer takes temporary possession of the floating vessel and through their contracted stay. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the marina dockage fees and fees charged by the web site Homeaway, where the floating vessel is advertised for rent.

Sale Revenue.  Revenue is recognized when earned, generally at closing of the sale of a vessel. Revenue is recognized on a gross basis in accordance with ASC 605-45. Cost of Revenue includes the capitalized cost of constructing a vessel.

Construction in progress

Costs to construct vessels are capitalized during the construction phase. Upon completion of a vessel the Company will either sell the vessel or place in it service as a rental property. If the vessel is to be leased the construction costs are transferred to property and equipment and depreciated over its useful life.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets.

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Valuation of Long-Lived Assets

We periodically evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

Derivatives

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a convertible note containing an embedded derivative instrument, the instrument is marked to fair value at the conversion date and the debt and derivative are removed from the balance sheet, the shares issued upon conversion of the note are recorded at their fair value and a gain or loss recognized.

Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4).

Recent Accounting Pronouncements

(See “Recently Issued Accounting Pronouncements” in Note 3 m) of Notes to the unaudited Consolidated Financial Statements.)

Plan of Operations

Historically, we generated revenue from the short-term vacation rental of the Miss Leah, a company owned vessel located in Boston Harbor, Massachusetts. At present, we expect to generate revenue from this vessel as a short-term vacation rental in the future. We listed this vessel for sale in June of 2015.

As of March 31, 2017, we had cash on hand of $38,086 for our operational needs. Currently, our operating expenses are approximately $14,500 per month. We are obligated to repay an outstanding loan in one lump payment in the amount of $100,000 on July 15, 2017 and a second one in one lump payment in the amount of $598,300 on May 18, 2017. If we fail to generate sufficient revenues or raise additional funds to meet our monthly operating costs we would have available cash for our operating needs for approximately two (2) months before repayment of the $598,300 due on May 18, 2017 and the $100,000 due on July 15, 2017.

We are focusing our efforts on commercializing luxury stationary vessels designed in a South Florida modern style. We completed the design of the Luxuria model in the first quarter of 2015. Luxuria is approximately one thousand six hundred (1,600) square feet, with two (2) bedrooms and bathrooms, and sleeps up to six (6) people. We began construction of Luxuria I in March 2016 and it is substantially complete after March 2017. We have begun negotiating for the construction of the barge bottom for Luxuria II.

We plan to use the Luxuria models as a short-term vacation rental property in South Florida and for outright sale. We believe that using the Luxuria as a short-term vacation rental in South Florida could provide a year round source of cash flow and a model for future custom build orders.

While rental of the Miss Leah presently and Luxuria in the future, are expected to provide a relatively steady revenue stream to us, the construction and sale of custom designed and built luxury floating vessels are expected to generate significantly greater revenues and potential profits.

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As of March 2017, we have expended $571,404 for the construction of Luxuria I, of which $70,000 was a non-cash payment in common stock of the Company.

We anticipate that each vessel will take between five (5) to seven (7) months, per vessel to construct once we begin Luxuria II, as Luxuria I had delays due to various unforseen circumstances and changes needed during the process of construction. We will require additional funds to develop and carry out our future plans including construction of our third vessel. We have secured funding for the construction of Luxuria II. We begin marketing each vessel when manufacturing commences.

Our first Luxuria barge bottom was delivered to us in late February 2016. We issued 425,000 shares of our common stock as payment for this barge bottom, valued at $70,000, or $0.16 per share, under an agreement dated August 11, 2016, at which time the market price of the stock was $0.23 per share. This party has not accepted the stock certificate and recently informed the Company that they want to renegotiate since the market price of the common stock has fallen below the negotiated price per share.

Our company owned vessel, the Miss Leah, is listed for sale at the price of $379,000. If sold, the Company is required to pay $200,000 to the creditor holding the $598,300 note at closing.  The retail price of the Luxuria is between $1,200,000 and $1,400,000. The subsequent sale of the Luxuria vessel would provide sufficient capital to construct two more Luxuria models. The sale of two (2) additional Luxuria models would provide sufficient net cash to construct four (4) Luxuria models.

Until such time as the Miss Leah is sold, we will continue to rent the vessel on a short term basis. We plan to market the Luxuria models to yacht brokers, real estate brokers and boat dealerships.

On August 11, 2016, pursuant to a securities purchase agreement and a secured convertible promissory note for $610,000, the Company drew $305,000 and received $227,500 in cash under this six month secured convertible promissory note. On October 5, 2016, pursuant to this securities purchase agreement and secured convertible promissory note, the Company drew $122,000 and received $92,000 in cash and on November 3, 2016, the Company drew $183,000 and received $150,000 in cash. This note is secured by all the assets of the Company, inclusive of the Miss Leah and the Luxuria 1, and the member interests of its wholly owned LLC. This note does not carry a stated interest rate, but carries an Original Issue Discount (OID) that totals $100,000 and is proportional to the total amount borrowed. An OID of $50,000 was recorded as a discount to the note for the initial draw, $20,000 for the second draw and $30,000 for the third draw and is being amortized over the remaining portion of the six month life of the note. In addition, the Company is required to pay $10,000 of the lender’s legal fees (pro rata to the draws) and $30,500 of brokerage commission which was withheld from the first two draws, both of which were also recorded as debt discounts and are being amortized over the six month life of the note. Also, the Company was required to issue 100,000 shares of restricted common stock which were valued at $0.10 per share based on then recent stock sales and recorded as a discount to the note and is being amortized over the six month life of the note. This note requires a $200,000 partial prepayment if and when the Company sells the Miss Leah. The note is personally guaranteed by the Company’s CEO, Robert Rowe. In event of default the note at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law.

The lender has the right at any time following an Event of Default, at its election, to convert (each instance of conversion is referred to herein as a “Conversion”) all or any part of the Conversion Eligible Outstanding Balance into shares (“Conversion Shares”) of fully paid and non-assessable common stock, $0.0001 par value per share (“Common Stock”), of Company as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price (as defined below). All Conversions shall be cash-less and not require further payment from Lender.

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Subject to the adjustments set forth herein, the conversion price (the “Conversion Price”) for each Conversion shall be equal to 60% (the “Conversion Factor”) multiplied by the lowest Closing Bid Price in the twenty (20) Trading Days immediately preceding the applicable Conversion. Additionally, if at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future Conversions. Finally, in addition to the Default Effect, if any Major Default occurs after the Effective Date (other than an Event of Default for failure to pay the Conversion Eligible Outstanding Balance on the Maturity Date), the Conversion Factor shall automatically be reduced for all future Conversions by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt, each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions in Conversion Factor, even if the same Major Default occurs three (3) separate times). For example, the first time the Conversion Shares are not DTC Eligible, the Conversion Factor for future Conversions thereafter will be reduced from 60% to 55% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major Default pursuant to Section 4.1(a), then for purposes of this example the Conversion Factor would be reduced by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default.

On January 5, 2017, pursuant to a securities purchase agreement and a secured promissory note for $830,000 available in five tranches, the Company drew $170,000 and received $150,000 in cash net of $15,000 OID and $5,000 legal fees under this nine month secured promissory note. On March 9, 2017, the Company drew $110,000 and received $100,000 in cash net of $10,000 OID under this nine month secured promissory note.  This note is secured by all the assets of the Company, inclusive of the Luxuria I and the Luxuria II, the member interests of its wholly owned LLC and personally guaranteed by Robert Rowe, CEO of the Company. The lender’s security interests are subordinate to the security interests of the August 11, 2016 lender.  This note is structured in multiple parts, first the initial $170,000 as drawn and a subsequent $660,000 which can be drawn at the Company’s option in tranches. This note does not carry a stated interest rate, (except in event of default as defined in the promissory note), but carries an Original Issue Discount (OID) that totals $75,000 and is pro-rata on each tranche drawn. The OID will be amortized over the remaining life of the note from the date drawn. In addition, the Company is required to pay $5,000 of the lender’s legal fees which was applied to the first tranche drawn, which will also be recorded as debt discount and will be amortized over the nine month life of the note.

This note requires a partial prepayment if and when the Company sells the Luxuria I and Luxuria II, upon the receipt of which the lender has agreed to release the security interest in the related vessel. This prepayment is 10% of the profits on the Luxuria I and 33% of the profits on the Luxuria II. If the Company rents/leases either the Luxuria I or II, then the prepayment is 20% of the gross rental profit. The note is personally guaranteed by the Company’s CEO, Robert Rowe. In event of default the note carries an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

 

Smaller reporting companies are not required to provide the information required by this item.

Item 4.    Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s President, Chief Financial Officer, Secretary, Treasurer and Director, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure for the reasons discussed below.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in the Company’s internal controls over financial reporting during the three-month period ending March 31, 2017, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II:  OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business.  To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

Item 1A.   Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

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

On January 2, 2017, we issued 1,100,000 common shares to Oceanside Equities, Inc. a Florida corporation controlled by Vince Beatty for consulting services to be rendered under a consulting agreement entered into on December 1, 2016. We valued these shares at $0.08 per share or an aggregate of $88,000. This agreement obligates us to issue 1,000,000 shares on July 1, 2017 and 1,000,000 shares on January 2, 2018.

On January 5, 2017, pursuant to a securities purchase agreement and a secured promissory note for $830,000 available in five tranches, the Company drew $170,000 and received $150,000 in cash net of $15,000 OID and $5,000 legal fees under this nine month secured promissory note. On March 9, 2017, the Company drew $110,000 and received $100,000 in cash net of $10,000 OID under this nine month secured promissory note.  This note is secured by all the assets of the Company, inclusive of the Luxuria I and the Luxuria II, the member interests of its wholly owned LLC and personally guaranteed by Robert Rowe, CEO of the Company. The lender’s security interests are subordinate to the security interests of the August 11, 2016 lender.  This note is structured in multiple parts, first the initial $170,000 as drawn and a subsequent $660,000 which can be drawn at the Company’s option in tranches. This note does not carry a stated interest rate, (except in event of default as defined in the promissory note), but carries an Original Issue Discount (OID) that totals $75,000 and is pro-rata on each tranche drawn. In addition, the Company is required to pay $5,000 of the lender’s legal fees which was applied to the first tranche drawn.

On January 19, 2017, the Company entered into a Consulting Agreement with Oliver Kalani and issued 200,000 shares pursuant thereto, valued at $16,000.

On January 23, 2017, the Company entered into a Consulting Agreement with Magno Company and issued 250,000 shares pursuant thereto, valued at $33,750.

On February 15, 2017, the Company issued 100,000 shares to Richy Biamos in conjunction with the extension of his note. The shares were valued at $6,000.

Item 3.     Defaults Upon Senior Securities

None.

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

On May 3, 2017 the Company issued 75,000 shares of Common Stock to Carter, Terry &  Company pursuant to an amendment to the Agreement between the Carter, Terry and the Company entered into on January 27, 2016.

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Item 6.    Exhibits

Exhibit No.		Exhibit Description		Incorporated By Reference						Filed Herewith
				Form		Date		Number
31.1		Certification Pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934 as amended								X
32.1		Certification Pursuant to 18 U.S.C. Section 1350								X

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SIGNATURES

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

 

Global Boatworks Holdings, Inc.

/s/ Robert Rowe

Name: Robert Rowe

Position: Chief Executive Officer and Chief Financial Officer

(Duly Authorized, Principal Executive Officer and Principal Financial Officer)

Dated: May 15, 2017

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